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Lamb, Hair, McDaniel 2010-2011 CHAPTER 15 Retailing 1 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 2 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 3 The Role of Retailing Discuss the importance of retailing in the U.S. economy LO1 4 Retailing Retailing All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use. LO1 5 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 LO1 6 Beyond the Book Stress “Value” to Attract Customers LO1 Because of the recession, customers are in a particularly cost-conscious mood and focusing on value. To grab their attention retailers can: 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 SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com. 7 REVIEW LEARNING OUTCOME The Importance of Retailing Retailing as a % of U.S. employment 11.6% Retailing as a % of U.S. businesses Retailing as a % of GDP 13% 40% LO1 8 Classifying Retailers Explain the dimensions by which retailers can be classified LO2 9 Classification of Retail Operations Ownership Level of Service Product Assortment Price LO2 10 Classification of Ownership Independent Retailers Owned by a single person or partnership and not part of a larger retail institution Chain Stores Owned and operated as a group by a single organization Franchises The right to operate a business or sell a product LO2 11 Level of Service Self Service Factory outlets Warehouse clubs LO2 Full Service Discount stores Exclusive stores 12 Types of Stores and Their Characteristics Type of Retailer Service Level Assortment Price Gross Margin Department Store Mod Hi-High Broad Mod-High Mod High Specialty Store High Narrow Mod-High High Supermarket Low Broad Moderate Low Convenience Store Low Med-Narrow Mod High Mod High Drugstore Low-Mod Medium Moderate Low Full-line Discounter Mod-Low Med-Broad Mod Low Mod Low Specialty Discounter Mod-Low Med-Broad Mod Low-low Mod Low Warehouse Clubs Low Broad Low-very low Low Off-price Retailer Low Med-Narrow Low Low Restaurant Low-High Narrow Low-High LO2 Low-High 13 Price Gross Margin LO2 The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted. 14 Major Types of Retail Operations Describe the major types of retail operations LO3 15 Major Types of Retail Operations Department Stores Specialty Stores Supermarkets Drugstores Convenience Stores Discount Stores http://www.walgreens.com Restaurants LO3 Online 16 Categories of Discount Stores Full-Line Discounters Specialty Discount Stores Warehouse Clubs Off-Price Discount Retailers LO3 17 Discount Stores Mass Merchandising LO3 Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products. 18 Discount Stores Supercenter Full-line discounter LO3 Retail store combining groceries and general merchandise goods with a wide range of services. Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”. 19 Specialty Discount Stores Category Killers Specialty discount stores that heavily dominate their narrow merchandise segment. LO3 20 Types of Retail Operations Department Stores Shopping Specialty Goods Specialty Stores Distinctive Products Customer Service Supermarket Drugstores Food Products Medications Health and Beauty Cosmetics Specialty Scrambled Merchandising Convenience Stores High Turnover Goods Discount Stores Restaurants supercenter Full-line extremevalue Specialty category killer Warehouse LO3 Off-price factory outlet 21 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 22 Nonstore Retailing Discuss nonstore retailing techniques LO4 23 Nonstore Retailing Automatic Vending Direct Retailing Direct Marketing Electronic Retailing LO4 24 Direct Retailing Door-to-Door Office-to-Office Home Sales Parties http://www.avon.com LO4 Online 25 Types of Direct Marketing Direct Mail Catalogs & Mail Order Shop-at-home networks Online retailing Telemarketing Electronic Retailing LO4 26 Beyond the Book Top E-Tailers by Sales Volume LO4 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. $4.8 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 27 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 80 Shutterfly 80 SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com. LO4 28 Nonstore Retailing Techniques Nonstore Retailing Vending Direct retailing LO4 Direct marketing direct mail catalogs telemarketing Electronic retailing online shop at home 29 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 4 30 LO Franchising Define franchising and describe its two basic forms LO5 31 Basic Forms of Franchising Product and Trade Name Franchising Business Format Franchising LO5 32 Franchising LO5 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. 33 Largest U.S. Franchisors 1. 2. 3. 4. 5. Subway McDonald’s Liberty Tax Services Sonic Drive-In Restaurants InterContinental Hotels Group 6. Ace Hardware Corp. 7. Pizza Hut 8. The UPS Store/Mail Boxes Etc. 9. Circle K 10. Papa John’s International Inc. LO5 11. Jiffy Lube International Inc. 12. Instant Tax Service 13. Baskin-Robbin’s USA Inc. 14. KFC Corp. 15. Jani-King 16. Dairy Queen 17. Super 8 Worldwide 18. Arby’s 19. JAN-PRO Franchising International Inc. 20. Taco Bell Corp. 34 Retail Marketing Strategy List the major tasks involved in developing a retail marketing strategy LO6 35 Retail Marketing Strategy Define & Select a Target Market Develop the “Six Ps” LO6 36 Defining a Target Market Demographics STEP 1: Segment the Market Geographics Psychographics LO6 37 Choosing the Retailing Mix STEP 2: Choose the Retailing Mix Product Place Price Personnel Promotion Presentation http://www.publix.com LO6 Online 38 The Retailing Mix Product Personnel Place Target Market Presentation LO6 Promotion Price 39 Choosing the Retailing Mix Product Offering LO6 The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix. 40 Retail Promotion Strategy Advertising Public Relations Publicity Sales Promotion LO6 41 The Proper Location Choosing a Community Choosing a Site Economic growth potential Freestanding Store Competition Shopping Center Geography Mall LO6 42 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 LO6 43 Shopping Center and Mall Locations Advantages • Design attracts shoppers • Activities and anchor stores draw customers • Ample parking • Unified image • Sharing of common area expenses LO6 Disadvantages • Expensive leases • Failure of common promotion efforts • Lease restrictions • Hours of operation • Anchor store domination • Direct competitors • Consumer time limits 44 Retail Prices Low Price Good Value Single Price Point EDLP LO6 High Price Quality Image 45 Presentation of the Retail Store Atmosphere LO6 The overall impression conveyed by a store’s physical layout, décor, and surroundings 46 Presentation of the Retail Store Employee type and density Merchandise type and density Fixture type and density Sound Odors http://www.apple.com Visual factors LO6 Online 47 Personnel and Customer Service Trading Up Two Common Selling Techniques Suggestion Selling LO6 48 Customer Service for On-Line Retailers Easy-to-use Web site Product availability Simple returns LO6 49 PRODUCT Width and depth of product assortment Developing a Retail Marketing Strategy LO6 PLACE Location and hours Promotion Advertising, publicity, public relations PRICE PRESENTATION Layout and atmosphere Personnel Customer service and personal selling TARGET 50 New Developments in Retailing Describe new developments in retailing LO7 51 New Developments in Retailing Interactivity Consumers are involved in the retail experience. M-commerce Purchasing goods through mobile devices. LO7 52