Retailing

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

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

Importance Of Retailing

- 18% of employment (24 mil 2005)

Impact on the Economy

Distribution Functions
- Time, Place
- Information & Possession Utility

Marketing Functions

A Retailing Career
Salary Societal Perspective Geographic mobility

Retail Career

Women in retailing

Career Progression

Prerequisites for Success

Analytical Skills Leadership Hard Work

Flexibility

Decisiveness Success

Perseverance

Organization
Creativity

Enthusiasm
Initiative

Stress Risk Taking Tolerance

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

In-Store

Department Store
Chain operations Wide variety & selection Full service - delivery, credit, returns, repair Examples:

Boscovs, Macys Bloomingdales

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

Hyper-markets: A Sure - Fire Hit, Bombs

Discount Store Super Center Hypermarket

. Average size (in square feet)

70,000 200 - 300 $10 - $20

150,000 300 - 350 $20 - $50

230,000 400 - 600 $75 - $100

Employees
Annual sales per store (in millions)

Gross profit margins

Stock-keeping units (Number of different kinds of items stocked)

18% - 19% 15% - 16% 7% - 8% 60,000 80,000

100,000

60,000 70,000

Specialty Stores

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

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

STOP & GO

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

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.

The Wheel of Retailing

- retailers usually enter the market with low service, low margin & price operations but evolve into higher service, cost & price merchants.
Conventional department stores High: status, margin, price (Specialty store)

Mass merchandise retailers Low: status, margin price, service (Wholesale clubs)

Wheel of Retailing
High Prices & Markups, Many services, Expensive Surroundings,

Small general stores

Department Stores

Factory outlets Members Only

discount outlets

Enter
Department stores
Low prices & Low markups, few services,

Category killers Entry of Discount stores

1955-1970

(austere) surroundings

Department stores
1890 -1910

Low price s & markups, few services ,

austere
1990s

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

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)

3 Major Types of Non Store Retailing

A. Direct Selling (face to face)

B. Direct Marketing (non personal mediums) C. Automatic Vending

A. Forms of Direct Selling

Direct Selling

Sales Visits
Bank Retailing

B. Forms of Direct Marketing

Direct-Response Marketing Catalog Marketing

$388

Television Home Shopping

Telemarketing

Forms of Direct Marketing

On line Retailing (E-Tailing): Advantages
Not location bound

Convenient

Interactive Shopbots

E-tailing was about 20 billion dollars in 2000 and estimated to rise to over 100 billion by 2005.

Percentage of Sales Online by Retail Segment

Source: Investors Business Daily, Wednesday, September 5, 2001, p. A6.

Forms of Direct Marketing

Internet Retailing: Disadvantages

Examination

Privacy/Security

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

Strategic Retailing Issues: The Marketing Mix

Merchandise Assortment Store Atmospherics Customer Service Product Price Retail List Price Discounts Credit

#1 Customers

Location, Location, Location!

Place

Promotion

Advertising Personal Selling Publicity Sales Promotion

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!

Strategic Issues #1. Location Dynamics

Consumers want convenience, a subjective measurement

Convenience Measurements
- Distance - Time - Parking - Traffic congestion

= Convenience

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

Consumer Shopping Patterns

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

Retail Chains Sears Penny K-Mart

Locate near to competitors for comparison shopping

Source: Scarborough Research, Cross Shopping Patterns, Stores (June 1986), p. 13.

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

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)

Strategic Issue #2

Merchandise Assortment Plus:

Store Location
Store Hours Targeted Customers

Store Promotions

Store Services
Store Personnel

Store Layout/Image

Many consumers value finding bargains.

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

Store Atmospherics

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

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?

In Store Pre sale Service

highly motivated, experienced & well paid work force - Retail jobs often pay poorly, are not challenging and produce high turnover

Personal Service Climate- Calls for a

Average length of employee tenure with retailers

29% 8% 30% 7 - 12 months 1 - 2 years 3 - 5 years 5 + years

33%

Estimates: 2005

Post-Sale Services

Complaints and adjustments

Credit Policies Product maintenance Product information Pick up/Delivery

Strategic Issue

Retailer Advertising
Location + Merchandise + Services + Atmospherics + ? Store Image
Advertising Medium(s) Newspapers - Television - Radio Magazine - Direct Mail - Videos-Web

Ideal Stores: What factors are most important in deciding where to shop? surveyed women said:
Price and Value Quality and Selection of Merchandise

44%

34%
Service

11%
Shopping Environment

11%
Source: Newspaper Advertising Bureau Inc. (1986)

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

Segmentation, targeting and positioning

1.
2. 3.

4.

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

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

Potential Channel Conflicts

Retailers
Exclusive Distribution Store Loyalty High Markup +Volume

Suppliers
Intense Distribution Brand Loyalty Low Markup/High Volume

Love - Hate Relationship

Perception as an Excellent Company Company Executives

Analysts

---------------------------------------------------------------------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% ----------------------------------------------------------------------

Target (TGT) Wal-Mart (WMT)

69% 75%

89% 94%

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

Chain Store Age,2001,p. 4c (Jan/Feb 01 Survey)

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 ???

RESEARCH Knowing Your Customer

Level of Customer Service? High - - - Low Sales Personnel? Hurried - - - Apathetic

Product Selection? Broad - - - Narrow

Retail Store Characteristics Consumer Profile? Sex Age Education Income

Store Image? Conservative - - - Modern?

Dual Wage Earners and Their Effect on Hours Spent Shopping

200% Dual incomes rose ... 12

8 and shopping hours dropped

100%
1965 1980 Year 1995

SOURCE: Vision for the New Millennium . . .(Atlanta: Kurt Salmon Associates, 1997). Used with permission

Applied Research In Retailing

Congruency of scent and music as a driver of in-store behavior

Hypothesis 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

For Scents:

Experiment Variables

Lavender = low arousal scent Grapefruit = high arousal scent

For Music:
Slow tempo classical = low arousal music Fast tempo classical = high arousal music

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.

Focus Group Interview Consumer Summary (1 of 2)

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

+ + +

Focus Group Interview Consumer Summary (2 of 2)

Store Hours Merchants Bloomsburg Town Convenience Parking Atmosphere Malls

Overall Evaluation Positive Negative + +

+ +

Bloomsburg Retailing Viewed From Three Distinct Perspectives:

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

- waits to go home - very selective

Retail Information System (RIS) and Merchandise Management Issues

Company Goals Merchandise Information System Promotion Information Human Resources Information

Operating Information

Accounting and Financial Information

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

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

Franchising: Disadvantages

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