Transcript Chapter 14
14 C H A P T E R Retailing McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives After studying this chapter, you should be able to: Understand the economic importance of retailing and its role in the marketing channel. Cite evidence of the globalization of retailing. Discuss some of the advances in retailing technology. Explain the reasons behind the growth of nonstore retailing. Describe key factors in the retail marketing environment, and understand how they relate to retail strategy. Cite important ethical and legal issues facing retailers. Bearden Marketing 5th Ed 14-2 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Best Buy Best Buy, the nation’s largest seller of electronics, is doing what many retail analysts believe all retailers should do: Focus on certain types of customers and ignore the rest. For the chosen customers, Best Buy is creating more value by concentrating on their needs and preferences. For those not chosen, Best Buy would be happy if those customers took their business elsewhere. Bearden Marketing 5th Ed 14-3 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Retailers’ Uniqueness in Channel Sell Smaller Quantities, More Frequently Retailers’ Uniqueness Provide Assortments Emphasize Atmospherics Bearden Marketing 5th Ed 14-4 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. The Role of Retailing Retailing Retail Sales Bearden Marketing 5th Ed An important part of many marketing channels, includes all the activities involved in selling products and services to the ultimate, or final, consumer.. Retail sales are sales to final consumers; wholesale sales are those to other businesses that in turn resell the product or service, or use it in running their own businesses. 14-5 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Retail versus Wholesale To be classified as a retailer, a firm’s retail sales must equal or exceed 50 percent of its total revenues. Firms with less than 50 percent retail sales are classified as wholesalers. Wal-Mart was reminded of the distinction when its Sam’s Wholesale Club was forced to change its name to Sam’s Club in states in which its retail sales exceeded the 50 percent benchmark. Ultimately, the word wholesale was dropped from all Sam’s Club store names. Bearden Marketing 5th Ed 14-6 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Economic Importance Retailing is a major force in the economy. Three million U.S. retailers employ 14 million people and generate an astonishing $2.5 trillion in annual revenues. This translates into a $9,100 retail expenditure for every man, woman, and child in the United States. Bearden Marketing 5th Ed 14-7 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Types of Retailers Independent Retailers Chains Independent retailers own and operate only one retail outlet – they account for more than three-fourths of all retail establishments. A retail chain owns and operates multiple retail outlets. By far, chain stores sell more merchandise than any other category of retailers. more Bearden Marketing 5th Ed 14-8 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Types of Retailers (con’t) Retail franchising is a form of chain ownership in which a franchisee pays the franchisor fees or royalties and agrees to run the franchise by prescribed norms, in exchange for use of the franchisor’s name. more Bearden Marketing 5th Ed 14-9 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Types of New Products (con’t) Leased Departments Cooperatives Bearden Marketing 5th Ed Leased departments are sections in a retail store that the owner rents to a second party. Responding to competitive pressures exerted by the buying power of chain stores, independent retailers sometimes band together to form retail cooperatives. Although each store remains independently owned, the retail cooperative generally adopts a common name and storefront. 14-10 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Trends in Retailing Global Retailing Trends in Retailing Technological Advances Customer Service Bearden Marketing 5th Ed 14-11 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Nonstore Retailing Nonstore retailing: sales outside a physical structure. Direct Retailing Direct retailing is the portion of direct marketing in which ultimate consumers, not business customers, do the buying. Direct Selling Direct selling: the sale of a consumer product or service, person-to-person, away from a fixed retail location. Vending Machine Sales Vending machines allow customers to purchase and receive merchandise from a machine. Bearden Marketing 5th Ed 14-12 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Customer Service in Retailing Customer service refers to the activities that increase the quality and value customers receive when they shop and purchase merchandise. Retailers rush to give lip service to the importance of customer service, but many still fall woefully short of providing it. Bearden Marketing 5th Ed 14-13 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Nonstore Retailing Consumers can buy almost anything via nonstore retailing. Amazon.com, which began as an online bookseller, now offers thousands of products ranging from home electronics to baby toys. Bearden Marketing 5th Ed 14-14 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Developing Retail Strategy The scope of retail products and services and the demands of consumers combine to produce a constantly changing business environment. A successful retailer must effectively manipulate the factors it can control to survive in a largely uncontrollable environment. Exhibit 14-4 Bearden Marketing 5th Ed 14-15 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Evaluating Retail Locations The old saying—and experts confirm it—is that the three most important factors in retailing are location, location, and location. Bearden Marketing 5th Ed 14-16 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Scrambled Merchandising The practice of adding unrelated product categories to existing product lines is referred to as scrambled merchandising. Exhibit 14-6 Bearden Marketing 5th Ed 14-17 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Scrambled Merchandising Bearden Marketing 5th Ed 14-18 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Ethical and Legal Issues Consumer Fraud Supplier Labor Practices Ecological Considerations Use of Customer Information Ethical and Legal Issues in Retailing Retail Theft Slotting Allowances Bearden Marketing 5th Ed 14-19 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Summary After studying this chapter, you should be able to: Understand the economic importance of retailing and its role in the marketing channel. Cite evidence of the globalization of retailing. Discuss some of the advances in retailing technology. Explain the reasons behind the growth of nonstore retailing. Describe key factors in the retail marketing environment, and understand how they relate to retail strategy. Cite important ethical and legal issues facing retailers. Bearden Marketing 5th Ed 14-20 © 2007 The McGraw-Hill Companies, Inc. All rights reserved.