Part Four Distribution Decisions 16 Retailing Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook

Chapter Learning Objectives To understand the purpose and function of retailers in the marketing channel To identify the major types of retailers To recognize the various forms of nonstore selling To examine major types of franchising and its benefits and weaknesses To explore strategic issues in retailing Copyright © Houghton Mifflin Company. All rights reserved.

Chapter Outline The Nature of Retailing Major Types of Retail Stores Nonstore Retailing Franchising Strategic Issues in Retailing Copyright © Houghton Mifflin Company. All rights reserved.

The Nature of Retailing Transactions in which ultimate consumers are the buyers Retailers Organizations that purchase products for the purpose of reselling them to ultimate consumers Retailers add value—shopping convenience, services, and purchasing assistance to customers Retailers create utility—time, place, possession, and form Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation. Copyright © Houghton Mifflin Company. All rights reserved.

Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Stores General-Merchandise Retailers A retail establishment that offers a variety of product lines Department stores Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management Discount stores Self-service, general merchandise stores offering brand name and private brand products at low prices Supermarkets Large, self-service stores that carry a complete line of food products, along with some nonfood products Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Stores (cont’d) General-Merchandise Retailers (cont’d) Superstores Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products Hypermarkets Stores that combine supermarket and discount shopping in one location Warehouse clubs Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Stores (cont’d) General-Merchandise Retailers (cont’d) Warehouse showrooms Retail facilities in large. low-cost buildings with large on-premise inventories and minimal services Catalog showrooms A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Stores (cont’d) Specialty Retailers Traditional specialty retailers Also called “limited-line” and “single-line” retailers Carry a narrow product mix with deep product lines (e.g., pet supplies) Have higher costs and higher margins Provide more product selection (first-line brands), product expertise, and high levels of personal service Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Stores (cont’d) Specialty Retailers (cont’d) Off-price retailers Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts Charge less than do department stores for comparable merchandise and offer few customer services Have established long-term relationships with suppliers for continuing supplies of reduced-price goods Category killers Concentrate on a major product category and compete on the basis of low prices and product availability Copyright © Houghton Mifflin Company. All rights reserved.

NonStore Retailing Nonstore Retailing The selling of products outside the confines of a retail facility Growth sector of retailing due to Consumers are less willing to devote personal time to shopping in retail stores. Poorly trained and informed retail personnel can’t offer needed sales assistance. Growing population of older shoppers who tend to shop less in large stores. Copyright © Houghton Mifflin Company. All rights reserved.

NonStore Retailing (cont’d) Direct Selling The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products Benefits Personal attention to customer Convenience of time and place of presentation Limitations High costs make it the most expensive form of selling Negative consumer view of direct selling Copyright © Houghton Mifflin Company. All rights reserved.

NonStore Retailing (cont’d) Direct Marketing The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet Copyright © Houghton Mifflin Company. All rights reserved.

Direct Marketing Catalog Marketing A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet Consumer advantages are efficiency and convenience Marketer advantages are lower location, facility, selling, and operating costs. Disadvantages are inflexibility and limited selection and local service availability. Copyright © Houghton Mifflin Company. All rights reserved.

Direct Marketing (cont’d) Direct-Response Marketing A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders Telemarketing The performance of marketing-related activities by telephone Copyright © Houghton Mifflin Company. All rights reserved.

Direct Marketing (cont’d) Television Home Shopping A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card Online Retailing Retailing that makes products available to buyers through computer connections Automatic Vending The use of machines to dispense products Copyright © Houghton Mifflin Company. All rights reserved.

Franchising Franchising An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration Franchiser furnishes equipment, buildings, management know-how, and marketing assistance. Franchisee supplies labor and capital, and operates the business by the provisions of the franchise agreement. Copyright © Houghton Mifflin Company. All rights reserved.

Copyright © Houghton Mifflin Company. All rights reserved.

Major Types of Retail Franchises Manufacturer Authorization Product producer licenses retailers to sell its brand name product(s) Distributor Authorization Product producer licenses distributors to sell its brand name product to retailers Producer Authorization Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies Copyright © Houghton Mifflin Company. All rights reserved.

Franchising (cont’d) Advantages Disadvantages Enables business startup with limited capital Provides developed and proven business to franchisee Attracts customers with established brand name Allows immediate market entry Motivates franchisee to succeed Disadvantages Control over aspects of the business and its operations by franchiser Expense of continuing franchise royalties and advertising fees Lack of control of franchisees by franchisor Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing Retail Store Location Factors affecting location Intended target market Kinds of products Suitability site for customer access Characteristics of existing retail operations Types of Locations Free-standing structures Position relative to competition Customer access and parking Traditional business districts Redevelopment of decaying downtown infrastructure Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing (cont’d) Traditional Shopping Centers Neighborhood shopping centers Usually consist of several small convenience and specialty stores. Community shopping centers Include one or more department stores (anchors), some specialty stores, and convenience stores. Regional shopping centers Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers. Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing (cont’d) Nontraditional Shopping Centers Factory outlet malls Shopping centers that feature discount and factory outlet stores carrying traditional brand name products Miniwarehouse mall Loosely planned centers that lease space to retailers running retail stores out of warehouse bays Nonanchored malls Do not have traditional department store anchors; instead combine off-price and category killer stores in a “power center” format Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing (cont’d) Retail Positioning Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment Store Image Atmospherics The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying Interior layout, colors, furnishings, and lighting Exterior storefront and entrance design, display windows, and traffic congestion Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing (cont’d) Scrambled Merchandising The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume Intent of scrambled merchandising Convert stores into one-stop shopping centers Generate more customer traffic Realize higher profit margins Increase impulse purchases Copyright © Houghton Mifflin Company. All rights reserved.

Strategic Issues in Retailing (cont’d) The Wheel of Retailing A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants. Maybry’s at the Mall Copyright © Houghton Mifflin Company. All rights reserved.

The Wheel of Retailing FIGURE 16.1 Source: Adapted from Robert F. Hartley, Retailing: Challenge and Opportunity, 3rd ed., p. 42. Copyright © 1984 by Houghton Mifflin Company. Used by permission. FIGURE 16.1 Copyright © Houghton Mifflin Company. All rights reserved.

After reviewing this chapter you should: Understand the purpose and function of retailers in the marketing channel Be able to identify the major types of retailers Recognize the various forms of nonstore retailing Have examined the major types of franchising and franchising’s strengths and weaknesses Have explored the strategic issues in retailing Copyright © Houghton Mifflin Company. All rights reserved.

Chapter 16 Supplemental Slides 16–29 Copyright © Houghton Mifflin Company. All rights reserved.

Key Terms and Concepts The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion. To rearrange the slide order or alter the content of the presentation select “Slide Sorter” under View on the main menu. left click on an individual slide to select it; hold and drag the slide to a new position in the slide show. To delete an individual slide, click on the slide to select, and press the Delete key. Select “Normal” under View on the main menu to return to normal view. Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Retailing Retailers General-Merchandise Retailers Transactions in which ultimate consumers are the buyers Retailers Organizations that purchase products for the purpose of reselling them to ultimate consumers General-Merchandise Retailers A retail establishment that offers a variety of product lines that are stocked in depth Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Department stores Discount Stores Supermarkets Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management Discount Stores Self-service, general merchandise stores offering brand name and private brand products at low prices Supermarkets Large, self-service stores that carry a complete line of food products, along with some nonfood products Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Superstores Hypermarkets Warehouse Clubs Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products Hypermarkets Stores that combine supermarket and discount shopping in one location Warehouse Clubs Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Warehouse Showrooms Catalog Showrooms Retail facilities in large. low-cost buildings with large on-premise inventories and minimal services Catalog Showrooms A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach Traditional Specialty Retailers Carry a narrow product mix with deep product lines Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Off-Price Retailers Category Killers Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts Category Killers Concentrate on a major product category and compete on the basis of low prices and product availability Nonstore Retailing The selling of products outside the confines of a retail facility Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Direct Selling Direct Marketing Catalog Marketing The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace Direct Marketing The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet Catalog Marketing A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Direct-Response Marketing Telemarketing A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders Telemarketing The performance of marketing-related activities by telephone Television Home Shopping A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Online Retailing Automatic Vending Franchising Retailing that makes products available to buyers through computer connections Automatic Vending The use of machines to dispense products Franchising An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Manufacturer Authorization Distributor Authorization Product producer licenses retailers to sell its brand name product(s) Distributor Authorization Product producer licenses distributors to sell its brand name product to retailers Producer Authorization Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Neighborhood Shopping Centers Usually consist of several small convenience and specialty stores. Community Shopping Centers Include one or more department stores (anchors), some specialty stores, and convenience stores. Regional Shopping Centers Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers. Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Factory outlet malls Miniwarehouse mall Shopping centers that feature discount and factory outlet stores carrying traditional brand name products Miniwarehouse mall Loosely planned centers that lease space to retailers running retail stores out of warehouse bays Nonanchored malls Do not have traditional department store anchors; instead combine off-price and category killer stores in a “power center” format Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms Retail Positioning Atmospherics Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment Atmospherics The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying Scrambled Merchandising The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume Copyright © Houghton Mifflin Company. All rights reserved.

Important Terms The Wheel of Retailing A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants. Copyright © Houghton Mifflin Company. All rights reserved.

Transparency Figure 16C General Merchandise Retailers Type of Retailer Examples Department store Foleys, Lord &Taylor, Sears Discount store Wal-Mart, Kmart, Target Supermarket Food Lion, A&P, Ralph’s, Safeway, Krogers Superstore Wal-Mart Supercenter Hypermarket Carrefour’s Warehouse club SAM’s, Price-Costco Warehouse showroom lkea Furniture Catalog showroom ServiceMerchandise Copyright © Houghton Mifflin Company. All rights reserved.

Transparency Figure 16E Examples of Category Killers Toys “R” Us Home Depot Best Buy Office Depot PETsMart Barnes & Noble Can you think of others? Copyright © Houghton Mifflin Company. All rights reserved.

Transparency Figure 16G Customers’ Reactions to Telemarketing Calls How can telemarketers be more effective in reaching customers? Source: “Do Not Disturb,” American Demographics, May 2001, p. 28. Adapted with permission. Copyright © Houghton Mifflin Company. All rights reserved.

Transparency Table 16H Percentage of Online Shoppers Who Have Experienced Problems Sometimes or Frequently Source: “Houston, We Have A Problem,” American Demographics, The Marketing Tools Directory, 2002, p. D60. Adapted with permission. Copyright © Houghton Mifflin Company. All rights reserved.