1. CHAPTER 15 Retailing Lamb, Hair, McDaniel 2010-2011
Marketing cannot be accomplished in isolation. Even though the marketing function resides with marketers, the concept of marketing must permeate the entire organization.

2. Chapter 13 Retailing
Learning Outcomes
LO 1 Discuss the importance of retailing in the U.S. economy
LO 2 Explain the dimensions by which retailers can be classified
LO 3 Describe the major types of retail operations
LO 4 Discuss nonstore retailing techniques

3. Chapter 13 Retailing
Learning Outcomes
LO 5 Define franchising and describe its two basic forms
LO 6 List the major tasks involved in developing a retail marketing strategy
LO 7 Describe new developments in retailing

4. Discuss the importance of retailing in the U.S. economy
Chapter 13 Retailing
The Role of Retailing
Discuss the importance of retailing in the U.S. economy
LO1

5. Retailing LO1 Retailing
Chapter 13 Retailing
Retailing
Retailing
All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
Notes:
Retailing has enhanced the quality of our daily lives, with the millions of goods and services provided mirroring the needs and styles of U.S. society.
Retailing affects all of us directly or indirectly. The retailing industry is one of the largest employers, as shown on the next slide.
Discussion/Team Activity:
Poll the class to see how many of the students have worked in the retail industry. How many are pursuing careers in the retail industry?
LO1

6. The Role of Retailing LO1
Chapter 13 Retailing
The Role of Retailing
Over 1.6 million U.S. retailers employ more than 24 million people
Retailers account for 11.6 percent of U.S. employment
Retailing accounts for 13 percent of U.S. businesses
Retailers ring up almost $4 trillion in sales—nearly 40 percent of the U.S. GDP
Industry is dominated by a few giant organizations, such as Wal-Mart
Notes:
Retailers ring up almost $4 trillion in sales annually, about 40 percent of the U.S. gross domestic product. Retail counts for 11.6 percent of U.S. employment, and nearly 13 percent of all business are considered retail under NAICS.
Although most retailers are small, a few giants dominate the industry. Wal-Mart annual sales are greater than the next five U.S. retail giants' sales combined.
Refer to “Hot Stores” box on page 196 for a list of the ten largest U.S. retailers.
LO1

7. Stress “Value” to Attract Customers
Chapter 13 Retailing
Stress “Value” to Attract Customers
Because of the recession, customers are in a particularly cost-conscious mood and focusing on value. To grab their attention retailers can:
Beyond the Book
Offer unique value propositions, i.e. prices, customer services, loyalty programs
Use innovative marketing concepts that will resonate with consumers, e.g. pop-up shops or a “green emphasis
Appeal to time-strapped customers with an efficient multi-channel shopping experience
Notes:
[The numbers in this table come from a biannual study conducted by ForeSee Results and FGI Research, using the methodology of the University of Michigan’s American Customer Satisfaction Index.]
You can see by studying the table that successful online retailers don’t follow a single model to achieve that success. For instance, LLBean is primarily a catalog company, zappos.com is strictly online, and victoriassecret.com is principally bricks-and-mortar. Retailers with freestanding stores, Web sites, and catalogs have successfully implemented a multichannel solution, where customers can shop the catalog or site, and go to the store to try the product on before purchasing it.
The number one challenge e-tailers have to meet is keeping the shopping experience consistent across channels.
SOURCE: Larry Freed, “Satisfied and Buying,” online at
LO1

8. REVIEW LEARNING OUTCOME
Chapter 13 Retailing
REVIEW LEARNING OUTCOME
The Importance of Retailing
11.6%
13%
40%
Retailing as a % of U.S. employment
Retailing as a % of U.S. businesses
Retailing as a % of GDP
LO1

9. Classifying Retailers
Chapter 13 Retailing
Classifying Retailers
Explain the dimensions by which retailers
can be classified
LO2

10. Classification of Retail Operations
Chapter 13 Retailing
Classification of Retail Operations
Ownership
Level of Service
Product Assortment
Notes:
A retail establishment can be classified according to its ownership, level of service, product assortment, and price.
Retailers use the latter three variables to position themselves in the competitive marketplace. These variables can be combined in several ways to create distinctly different retail operations.
Price
LO2

11. Classification of Ownership
Chapter 13 Retailing
Classification of Ownership
Independent
Retailers
Chain Stores
Franchises
Owned by a single person or partnership and not part of a larger retail institution
Owned and operated as a group by a single organization
The right to operate a business
or sell a product
Notes:
Retailers can be broadly classified by form of ownership.
Independent retailers are retailers owned by a single person or partnership. Around the world, most retailers are independent, operating one or a few stores in their community.
Chain stores are owned and operated as a group by a single organization, with many administrative tasks being handled by the home office for the entire chain.
Franchises are owned and operated by individuals, but are licensed by a larger supporting organization. With franchising, the advantages of both independent ownership and the chain store organization are combined.
LO2

12. Level of Service LO2 Self Service Full Service Discount stores
Chapter 13 Retailing
Level of Service
Full Service
Self Service
Discount stores
Exclusive stores
Factory outlets
Warehouse clubs
Notes:
The level of service that retailers provide can be classified along a continuum, from full-service to self-service.
Discussion Activity:
Many students will not realize that gas stations used to offer full- and self-service pumps. As students to consider whether full-service gasoline is a retailing option that can be successfully revived. You may need to give a detailed description of the elements included in full-service gas pumping (pumping, windshield washing, fluid check, payment from car).
LO2

13. Types of Stores and Their Characteristics
Chapter 13 Retailing
Types of Stores and Their Characteristics
Assort-
ment
Price
Gross Margin
Broad
Narrow
Med-Narrow
Medium
Med-Broad
Mod-High
Moderate
Mod High
Mod Low
Mod Low-low
Low-very low
Low
Low-High
High
Type of Retailer
Specialty Store
Supermarket
Convenience Store
Drugstore
Full-line Discounter
Specialty Discounter
Warehouse Clubs
Off-price Retailer
Restaurant
Service
Level
Mod Hi-High
Low-Mod
Mod-Low
Department Store
Notes:
Exhibit 13.1 lists the major types of retail stores and classifies them by level of service, product assortment, price, and gross margin.
LO2

14. Chapter 13 Retailing
Price
Gross
Margin
The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.
Notes:
Price is a fourth way to position retail stores. Traditional department stores and specialty stores usually charge the suggested retail price. In contrast, discounters, factory outlets, and off-price retailers use low prices as a lure for shoppers.
Refer to the last column of Exhibit 13.1 to see how gross margin and price levels correlate to the various types of stores.
LO2

15. Major Types of Retail Operations
Chapter 13 Retailing
Major Types of Retail Operations
Describe the
major types of
retail operations
LO3

16. Major Types of Retail Operations
Chapter 13 Retailing
Major Types of Retail Operations
Department Stores
Specialty Stores
Supermarkets
Drugstores
Convenience Stores
Discount Stores
Restaurants
Online: Walgreen’s
Do you think drugstore Web sites add value for the consumer? What services on the Walgreens’ site would you be most likely to use? Would Internet selling be a factor in your choice of a pharmacy? To what group of consumers might selling items over the Internet be the most appealing? Why?
Notes:
With the experimentation with alternative formats of retail stores, classification has become more difficult.
Department stores: carries a wide variety of shopping and specialty goods. Purchases are made within each department.
Specialty stores: merchandise is tailored to specific target markets. Price is a secondary consideration to consumers. These stores provide a low-risk testing ground for many new products.
Supermarkets: U.S. consumers spend about a tenth of their disposable income in supermarkets.
Drugstores: stock pharmacy-related products and services.
Convenience stores: defined as a miniature supermarket, carrying only a limited line of convenience goods.
Discount stores: a retailer that competes on the basis of low prices, high turnover, and high volume.
Restaurants: straddle the line between retailing establishments and service establishments.
Online
LO3

17. Categories of Discount Stores
Chapter 13 Retailing
Categories of Discount Stores
Full-Line Discounters
Specialty Discount Stores
Warehouse Clubs
Off-Price Discount Retailers
Notes:
Full-line discount stores offer very limited service and a broad assortment of well-known, nationally branded goods. Wal-Mart is the largest full-line discount store in terms of sales. Supercenters combine groceries and general merchandise with a wide range of services in one location.
Specialty discount stores offer a nearly complete selection of single-line merchandise and are often termed category killers because they dominate their merchandise segment.
Warehouse clubs sell a limited selection of appliances, household items, and groceries, usually in bulk and to members only.
Off-price retailers sells at prices 25 percent or more below traditional department stores.
Discussion/Team Activity:
List discount stores in each of the above categories.
LO3

18. Discount Stores
Chapter 13 Retailing
Mass Merchandising
Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.
LO3

19. Discount Stores
Chapter 13 Retailing
Supercenter
Retail store combining groceries and general merchandise goods with a wide range of services.
Full-line discounter
Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”.
LO3

20. Specialty Discount Stores
Chapter 13 Retailing
Category Killers
Specialty discount stores that heavily dominate their narrow merchandise segment.
LO3

21. Types of Retail Operations
Chapter 13 Retailing
Types of Retail Operations
Department Stores
Specialty Stores
Supermarket
Drugstores
Convenience Stores
Discount Stores
Restaurants
Full-line
Shopping
Distinctive Products
Food Products
Medications
High Turnover Goods
supercenter
Specialty Goods
Health and Beauty
Customer Service
extreme- value
Cosmetics
Specialty
Scrambled Merchandising
Specialty
category killer
Warehouse
Off-price
factory outlet
LO3

22. Aldi
Started in 1976 in Iowa, ALDI is increasing its market presence as a discount grocer. Offering a slim 1,400 products as ALDI select brands, the chain is able to give consumers deep discounts through supplier deals and their no-frills approach.
Products must meet national brand standards, but consumers purchase for up to 50% less.
LO3

23. Discuss nonstore retailing techniques
Chapter 13 Retailing
Nonstore Retailing
Discuss nonstore retailing techniques
LO4

24. Nonstore Retailing LO4 Automatic Vending Direct Retailing
Chapter 13 Retailing
Nonstore Retailing
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
Notes:
Nonstore retailing is shopping without visiting a store. The major forms are shown here.
Because consumers demand convenience, nonstore retailing is growing faster than in-store retailing.
LO4

25. Direct Retailing LO4 Door-to-Door Office-to-Office Home Sales Parties
Chapter 13 Retailing
Direct Retailing
Door-to-Door
Office-to-Office
Home Sales Parties
Online
Avon
What advantages to you think the Avon site has over a visit from an Avon representative? Can you get the same amount of product information from each? Does Avon offer any products that you would prefer to order from a representative?
Notes:
The sales of direct retailers, such as Avon and Tupperware, have suffered as more women have entered the workforce. Direct retailers are turning to direct mail, telephone, traditional retailing venues, and the Internet to reach more buyers.
Direct retailers are also exploring opportunities in other countries.
Online
LO4

26. Types of Direct Marketing
Chapter 13 Retailing
Types of Direct Marketing
Telemarketing
Catalogs & Mail Order
Direct Mail
Electronic Retailing
Notes:
Direct marketing refers to the techniques used to get consumers to make a purchase from home, office, or other non-retail setting. These include direct mail, catalogs and mail order, telemarketing, and electronic retailing. Examples of electronic retailing include shop-at-home networks and on-line retailing.
Shop-at-home networks include the Home Shopping Network and the QVC Network. This industry has grown into a multibillion-dollar business with a loyal customer following.
The use of on-line retailing has exploded in the last several years due to the convenience and cost savings to consumers. In 2005, e-retailers’ online sales surpassed $140 billion, by 2006, sales were $300 billion.
Online auctions run by Internet companies such as eBay and Amazon.com have enjoyed phenomenal success.
As the popularity of online retailing grows, it is becoming critical that retailers be online and that their stores, Web sites, and catalogs be integrated.
Shop-at-home networks
Online retailing
LO4

27. Beyond the Book Top E-Tailers by Sales Volume LO4
Chapter 13 Retailing
Top E-Tailers by Sales Volume
America's Top Ten Retail Businesses
Rank
Company
Web Sales Volume
(in billions) 1
Amazon.com Inc.
$19.2 2
Staples Inc.
$5.6 3
Dell Inc.
$4.8 4
Office Depot Inc. 5
Apple Inc.
$3.6 6
OfficeMax Inc.
$3.1 7
Sears Holding Corp.
$2.7 8
CDW Corp.
$2.6 9
Newegg.com
$2.1 10
Best Buy
$2.0
Beyond the Book
Notes:
[The numbers in this table come from a biannual study conducted by ForeSee Results and FGI Research, using the methodology of the University of Michigan’s American Customer Satisfaction Index.]
You can see by studying the table that successful online retailers don’t follow a single model to achieve that success. For instance, LLBean is primarily a catalog company, zappos.com is strictly online, and victoriassecret.com is principally bricks-and-mortar. Retailers with freestanding stores, Web sites, and catalogs have successfully implemented a multichannel solution, where customers can shop the catalog or site, and go to the store to try the product on before purchasing it.
The number one challenge e-tailers have to meet is keeping the shopping experience consistent across channels.
LO4

28. Top E-Tailers by Customer Satisfaction
Chapter 13 Retailing
Top E-Tailers by Customer Satisfaction
Customer Satisfaction (out of 100 points)
Netflix.com 86
QVC.com 84
Amazon.com 83
DrsFosterSmith.com 81
Apple.com 80
Newegg.com
Shutterfly
Notes:
[The numbers in this table come from a biannual study conducted by ForeSee Results and FGI Research, using the methodology of the University of Michigan’s American Customer Satisfaction Index.]
You can see by studying the table that successful online retailers don’t follow a single model to achieve that success. For instance, LLBean is primarily a catalog company, zappos.com is strictly online, and victoriassecret.com is principally bricks-and-mortar. Retailers with freestanding stores, Web sites, and catalogs have successfully implemented a multichannel solution, where customers can shop the catalog or site, and go to the store to try the product on before purchasing it.
The number one challenge e-tailers have to meet is keeping the shopping experience consistent across channels.
SOURCE: Larry Freed, “Satisfied and Buying,” online at
LO4

29. Nonstore Retailing Techniques
Chapter 13 Retailing
Nonstore Retailing Techniques
Nonstore Retailing
Vending
Direct retailing
Direct marketing
Electronic retailing
direct mail
catalogs
telemarketing
online
shop at home
LO4

30. Vending Machine Variety
Reverse Vending Machines
Input recyclables and the machine sorts, compresses, and pays out refunds based on the container.
Used Golf Ball Vending Machines
Tilly-Miss fills candy-style dispensers with reclaimed golf balls.
Kosher Hot Dog Vending Machines
Kosher Cart cooks hot dogs and other kosher foods
Custom Juice Drinks Vending Machines
Select and mix custom juice drinks
Moobella Custom Ice Cream Vending Machines
Make custom ice cream by mixing base flavors and mix-ins
LO4

31. Franchising LO5 Define franchising and describe its two basic forms
Chapter 13 Retailing
Franchising
Define franchising
and describe its
two basic forms
LO5

32. Basic Forms of Franchising
Chapter 13 Retailing
Basic Forms of Franchising
Product and Trade Name
Franchising
Business Format Franchising
Notes:
A franchise is a continuing relationship in which a franchiser grants to a franchisee the business rights to operate or sell a product.
The franchiser originates the trade name, product, operation methods, etc. The franchisee pays the franchiser for the right to use its name, product, or methods.
The initial franchise fee generally ranges from $50,000 to $250,000 and higher, and royalty fees paid weekly/monthly are in the range of 3 to 7 percent of gross revenues. For example, a McDonald’s franchise costs an initial $45,000 per store plus a monthly fee. Start-up costs for equipment and expenses range from $511,000 to over $1 million.
LO5

33. Product and Trade Name Franchising
Chapter 13 Retailing
Franchising
Product and Trade Name Franchising
Dealer agrees to sell in products provided by a manufacturer or wholesaler.
Business
Format
Franchising
An ongoing business relationship between a franchiser and a franchisee.
LO5

34. Largest U.S. Franchisors
Chapter 13 Retailing
Largest U.S. Franchisors
Notes:
Box on page 205 features information on the largest U.S. franchisors.
LO5

35. Retail Marketing Strategy
Chapter 13 Retailing
Retail Marketing Strategy
List the major tasks involved in developing a retail marketing strategy
LO6

36. Retail Marketing Strategy
Chapter 13 Retailing
Retail Marketing Strategy
Define & Select a Target Market
Develop the “Six Ps”
Notes:
Retailers develop marketing strategies based on overall goals and strategic plans.
The key tasks in strategic retailing are defining and selecting a target marketing and developing the retailing mix to meet the needs of the chosen target market.
The key tasks in strategic retailing are defining and selecting a target market and developing the retailing mix to meet the needs of the chosen market.
LO6

37. Defining a Target Market
Chapter 13 Retailing
Defining a Target Market
STEP 1:
Segment the Market
Demographics
Geographics
Psychographics
Notes:
The first task in developing a retail strategy is to define the target market. Defining the target market begins with market segmentation. Successful retailing is based on knowing the customer.
Target markets are defined by demographics, geographics, and psychographics.
LO6

38. Choosing the Retailing Mix
Chapter 13 Retailing
Choosing the Retailing Mix
STEP 2:
Choose the Retailing Mix
Product
Price
Promotion
Place
Personnel
Presentation
Notes:
The retailing mix consists of six P’s: the four P’s of the marketing mix (product, price, promotion, and place), plus presentation and personnel.
The combination of the 6 P’s projects a store image, which influences perceptions. Retail stores can be positioned on the three dimensions: service, product assortment, and price. Everything else—place, presentation, and promotion-- can be used to fine-tune the basic positioning.
Online
LO6

39. The Retailing Mix LO6 Target Market Product Price Place Promotion
Chapter 13 Retailing
The Retailing Mix
Target Market
Product
Price
Place
Promotion
Personnel
Presentation
Notes:
Exhibit 13.2 shows the retailing mix.
LO6

40. Choosing the Retailing Mix
Chapter 13 Retailing
Choosing the Retailing Mix
Product
Offering
The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.
LO6

41. Retail Promotion Strategy
Chapter 13 Retailing
Retail Promotion Strategy
Advertising
Public Relations
Publicity
Sales Promotion
Notes:
The goal of retail promotion strategy is to position the store in consumers’ minds. Ads, special events, promotions, even grand openings are an orchestrated blend of advertising, merchandising, goodwill, and glitter.
Retailers’ advertising is carried out mostly at the local level, providing store information, hours, prices, and sales. In contrast, national retail advertising focuses on image.
Many retailers these days favor direct mail or frequent shopper programs as a cost-effective means of increasing brand loyalty and spending by core customers.
LO6

42. Economic growth potential
Chapter 13 Retailing
The Proper Location
Choosing a Community
Choosing a Site
Economic growth potential
Competition
Geography
Freestanding Store
Shopping Center
Mall
Notes:
The retailing axiom “location, location, location” has long emphasized the importance of place to the retail mix. The retailer is making a large commitment of resources that reduces future flexibility, and the location will affect the store’s future growth and profitability.
Factors to consider in site selection are the area’s economic growth potential, the amount of competition, and geography.
One final decision about location is whether to have a freestanding unit or to become a tenant in a shopping center or mall.
LO6

43. Important Factors for Site Choice
Chapter 13 Retailing
Important Factors for Site Choice
Neighborhood socioeconomics
Traffic flows
Land costs
Zoning regulations
Public transportation
Site’s visibility, parking, entrances and exits, accessibility, and safety
Fit with other stores
Notes:
Specific site considerations are the neighborhood socioeconomic characteristics, traffic flows, land costs, zoning regulations, and public transportation.
Additional variables are the site’s visibility, parking, entrance and exit locations, accessibility, and safety/security issues.
It is also important to ensure that the store fits with its surrounding environment. A Dollar General store would probably not be wanted next to a Neiman Marcus department store.
LO6

44. Shopping Center and Mall Locations
Chapter 13 Retailing
Shopping Center and Mall Locations
Advantages
Disadvantages
Expensive leases
Failure of common promotion efforts
Lease restrictions
Hours of operation
Anchor store domination
Direct competitors
Consumer time limits
Design attracts shoppers
Activities and anchor stores draw customers
Ample parking
Unified image
Sharing of common area expenses
LO6

45. Good Value Single Price Point EDLP
Chapter 13 Retailing
Retail Prices
Low Price
High Price
Good Value Single Price Point EDLP
Quality
Image
Notes:
The retailer’s ultimate goal is to sell products to consumers at a price that ensures profits.
Price is a key element in a store’s positioning strategy and classification. Higher prices often indicate quality and prestige, while discounters and off-price retailers offer a good value for the money.
A pricing trend is everyday low pricing, or EDLP.
LO6

46. Presentation of the Retail Store
Chapter 13 Retailing
Presentation of the Retail Store
Atmosphere
The overall impression conveyed by a store’s physical layout, décor, and surroundings
LO6

47. Presentation of the Retail Store
Chapter 13 Retailing
Presentation of the Retail Store
Employee type and density
Merchandise type and density
Fixture type and density
Sound
Odors
Visual factors
Online: Apple Stores
Apple Computer’s retail stores are set up to accommodate visitors who wish to experiment with and learn about Apple’s products. Visit Apple’s Web site and use the store locator to find a store near you and then report on the presentations and workshops scheduled at that location for the week. Compare the schedule to a store from another area. Do the schedules differ? If so, how? Could apple find a way to tie its in-store programs to its Web site? How?
Notes:
The presentation of a retail store helps determine the store’s image and positioning in consumers’ minds. For example, positioning as an upscale store would use a lavish or sophisticated presentation.
The main element of presentation is atmosphere, with the most influential factors shown on this slide.
Employee type and density: an employee’s general characteristics such as friendly and knowledgeable, and the number of employees in the selling space.
Merchandise type and density: the type of merchandise carried and how it is displayed.
Fixture type and density: elegant, trendy, uncluttered. Technology may be added as a fixture.
Sound: music at a restaurant or store.
Odors: smells of pastries in bakeries, fragrances as a key design element.
Visual factors: colors can create a mood or focus attention.
Online
LO6

48. Personnel and Customer Service
Chapter 13 Retailing
Personnel and Customer Service
Suggestion Selling
Trading Up
Two Common
Selling Techniques
Notes:
Retail salespeople persuade shoppers to buy. They are trained in two common selling techniques.
Trading up: persuading customers to buy a higher-priced item.
Suggestion selling: seeks to broaden customers’ original purchases with related items.
LO6

49. Customer Service for On-Line Retailers
Chapter 13 Retailing
Customer Service for On-Line Retailers
Easy-to-use Web site
Product availability
Simple returns
Notes:
Providing customer service is a challenging element in the retail mix because customer expectations are varied.
Online shoppers expect an easy-to-use Web site, products to be available, and simple returns.
LO6

50. Developing a Retail Marketing Strategy
Chapter 13 Retailing
PRODUCT
and depth of product assortment
Width
PLACE
Developing a Retail Marketing Strategy
Location
and hours
Promotion
Advertising,
publicity,
public relations
PRICE
PRESENTATION
Layout
and atmosphere
Personnel
Customer service
and
personal selling
TARGET
LO6

51. New Developments in Retailing
Chapter 13 Retailing
New Developments in Retailing
Describe new developments in retailing
LO7

52. New Developments in Retailing
Chapter 13 Retailing
New Developments in Retailing
Interactivity
Consumers are involved in the
retail experience.
M-commerce
Purchasing goods through mobile devices.
Notes:
Retailers are adopting new strategies to better serve customers. Two recent developments are:
Interactivity: get customers involved in the process, such as bagging and pricing fruits and vegetables. Another example is Build-A-Bear, a store that enables customers to make their own stuffed animal.
M-Commerce: enables consumers using wireless mobile devices to connect to the Internet and shop. For example, Coca-Cola drinkers in Europe dial a phone number on their mobile device, the machine signals to select a drink, and the transaction appears on the next phone bill.
M-commerce is used because it saves time and offers more convenience in a greater number of locations.
LO7