Download Retailing

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.
16–2
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.
16–3
The Nature of Retailing
• 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.
16–4
Copyright © Houghton Mifflin Company. All rights reserved.
16–5
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.
16–6
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.
16–7
Major Types of Retail Stores (cont’d)
• General-Merchandise Retailers (cont’d)
–Warehouse showrooms
• Retail facilities in large. low-cost buildings with large onpremise 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.
16–8
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.
16–9
Major Types of Retail Stores (cont’d)
• Specialty Retailers (cont’d)
–Off-price retailers
• Buy manufacturers’ seconds, overruns, returns, and offseason 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
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16–10
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.
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16–11
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.
16–12
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
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16–13
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.
16–14
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.
16–15
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 tollfree 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.
16–16
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.
16–17
Copyright © Houghton Mifflin Company. All rights reserved.
16–18
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.
16–19
Franchising (cont’d)
• Advantages
–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.
16–20
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.
16–21
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.
16–22
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.
16–23
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.
16–24
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.
16–25
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.
Copyright © Houghton Mifflin Company. All rights reserved.
16–26
The Wheel of Retailing
Source: Adapted from Robert F. Hartley, Retailing: Challenge and Opportunity, 3rd ed., p. 42. Copyright © 1984
by Houghton Mifflin Company. Used by permission.
Copyright © Houghton Mifflin Company. All rights reserved.
FIGURE 16.1
16–27
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.
16–28
Chapter 16
Supplemental Slides
Copyright © Houghton Mifflin Company. All rights reserved.
16–29
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.
16–30
Important Terms
• Retailing
–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.
16–31
Important Terms
• 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.
16–32
Important Terms
• 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.
16–33
Important Terms
• 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
• Traditional Specialty Retailers
–Carry a narrow product mix with deep product lines
Copyright © Houghton Mifflin Company. All rights reserved.
16–34
Important Terms
• Off-Price Retailers
–Buy manufacturers’ seconds, overruns, returns, and offseason 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.
16–35
Important Terms
• Direct Selling
–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.
16–36
Important Terms
• 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
• Television Home Shopping
–A form of selling in which products are presented to
television viewers, who can buy them by calling a tollfree number and paying with a credit card
Copyright © Houghton Mifflin Company. All rights reserved.
16–37
Important Terms
• Online Retailing
–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.
16–38
Important Terms
• 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.
16–39
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.
16–40
Important Terms
• 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.
16–41
Important Terms
• 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
• 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.
16–42
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.
16–43
Transparency Figure 16C
General Merchandise Retailers
Type of Retailer
Department store
Examples
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.
16–44
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.
16–45
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.
16–46
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.
16–47