© 2000 South-Western College Publishing 1 CHAPTER FOURTEEN RETAILING Prepared by Jack Gifford Miami...
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Transcript of © 2000 South-Western College Publishing 1 CHAPTER FOURTEEN RETAILING Prepared by Jack Gifford Miami...
© 2000 South-Western College Publishing
1
CHAPTER FOURTEEN
RETAILING
Prepared by Jack Gifford
Miami University (Ohio)
© 2000 South-Western College Publishing
2
THE ROLE OF RETAILING
Retailing - all the activities directly related to the sale of goods and services to the ultimate consumer for personal, non business use has enhanced the quality of our daily lives.
Retailing affects all of us directly in our daily lives Retailing includes obvious businesses like
department stores and supermarkets, but also hotels, movie theatres, restaurants and professional sports games.
© 2000 South-Western College Publishing
3
THE RETAILING INDUSTRY
Employs over 20,000,000 people in the United States, representing 1 out of 5 workers
Retailers in the US ring up over 2.2 trillion dollars in sales each year, representing over 25% of our GDP
Although retailing has many small and large retailers, the largest 10% do over one-half of the total retail dollars and employ 40% of all retail workers.
© 2000 South-Western College Publishing
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CLASSIFICATION OF RETAIL OPERATIONS
Retail ownership can be classified according to its… Ownership Level of Service Product assortment Price Margin Turnover In-store vs Out-of-store
We can best understand the meaningful differences and similarities between retailers by discussing in four pairs.
© 2000 South-Western College Publishing
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ASSORTMENT STRATEGY #1
High Margin
Low Margin
HighTurnover
LowTurnover
ConvenienceStores
Old NavySpecialty Store
GucciSpecialty Store
KMart
© 2000 South-Western College Publishing
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ASSORTMENT STRATEGY #2
Deep
Shallow
WideNarrow
GucciSpecialty Store
ConvenienceStores
KMart
Old NavySpecialty Store
May CompanyDepartment Stores
© 2000 South-Western College Publishing
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SERVICE / PRICE STRATEGY
High Price
Low Price
HighMargin
LowMargin
GucciSpecialty Store
KMart
ConvenienceStores
May CompanyDepartment Stores
© 2000 South-Western College Publishing
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CLASSIFICATION BY OWNERSHIP AND PHYSICAL PRESENCE
Ownership Independent Chain Franchise
Physical Presence In-store Non-store presence
Door-to-door Telemarketing Internet marketing Direct-response Direct-mail and
catalog Catalog
A careful examination of any form of retailing against these eight dimensions provides one with a fairly clear picture of the nature of that organization and how the marketing mix will be best applied to support their corporate objectives.
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Department stores Moderately high margin and medium high
turnover High service and moderate price Deep and wide assortment Mostly large chains and In-store presence
Current market strategies Trying to gain back market share from specialty
stores Reduce prices and costs through consolidation
and acquisitions
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Specialty Stores Almost always narrow and deep Moderately high margin and moderately high
turnover High service and low to high price Independent, chain or franchise In-store or non-store
Trends High growth around niche markets Distinctive atmospherics
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Supermarkets Small margins, high turnover, scrambled
merchandising, limited service Increase in specialty foods, ethnic foods and
pre-prepared meals Movement toward superstores that combine
good and non-food products Increasing emphasis on loyalty programs
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Drugstores Expanding depth and breadth of merchandise Increase use of information technology to
better serve regular customers Aging marketplace should provide strong
demand in the coming years Electronic and direct mail pharmacy services
are challenging in-store pharmacies
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Discount stores, superstores, extreme-value stores and hypermarkets Stores such as Wal-Mart, Kmart and Target are
doing extremely well because of tight cost control, economies of scale, high turnover, every-day-low-prices (EDLP) and huge merchandise depth and breadth. They are also expanding overseas and experimenting with various superstore and smaller supermarkets.
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Discount specialty stores and category killers Represent a blending of a specialty store and a
deep discount store to offer a very large selection of a narrow category of merchandise and low prices (Toys R Us, Circuit City, PetsMart, Office Depot)
Low margin, high turnover operations, with tight cost controls
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Other major classifications of retailers include… Warehouse clubs Factory outlets Non-store retailing
Automatic vending Direct retailing (door-to-door, office-to-office, home
sale parties) Direct-response marketing (Direct mail, catalog's,
telemarketing, shop-at-home networks (TV and Telephone)
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Other major classifications of retailers include (continued)… Non-store retailing(continued)
Online retailing Although currently small, growing at over 100%
per year Has been very successful in selling specialty
products, including music, books, computers and software
© 2000 South-Western College Publishing
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TRADITIONAL CLASSIFICATIONS
Franchising In the United states, there are over one-half million
franchisers with combined sales approaching one trillion dollars, or one-third of all retailing.
Product and trade name franchising (Coca-Cola) and business format franchising (Burger King) are the two basic forms of franchising
Franchising has aggressively expanded internationally, with 27 McDonald franchises in Moscow, The Russian Federation, alone.
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Retailers must develop marketing strategies based upon overall goals and strategic plans.
Key tasks in strategic retailing are...
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
•Successful retailing has always been based upon knowing the customer
•Target markets are often defined by demographics, geographies, and psychographics
•Defining a viable target market for the present and the future is essential before deciding on a retail marketing mix
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• Retailers must have the right product at the right time in the right amounts. Any “wrongs” will spell disaster in today’s competitive marketplace
•The appropriate depth and breadth must be carried.
•The appropriate mix of national brands, designer brands, and private label is essential
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• Customers have become very sophisticated in terms of price comparisons, and shop between competing forms of retailers for many products.
•A strong distinctive competitive advantage today is to be the low cost, and subsequently the low price outlet of a major product category
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• Includes advertising, public relations, and sales promotion
•Retailers are experimenting with new media and changing mixes of promotions to most effectively reach the customer
•Increased use of direct mail, catalog programs, and frequent shopper plans
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• The key to successful in-store retailing is location, location and location!
•Store may be free standing or part of central business district or shopping center
•Shopping centers come in various sizes, from the small strip cluster to enormous super regional centers containing over 850 stores.
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• All retailers, including self service retailers, are emphasizing the importance of knowledgeable and friendly sales personnel.
•Personnel shortages, low wages, and a low image have made it difficult for retailers to attract and retain qualified sales personnel.
•This difficult situation will become an increasing problem in the coming years
© 2000 South-Western College Publishing
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RETAIL STRATEGIC MARKETING
Defining and selecting a target market
The marketing mix, plus 2
Product (assortment)
Pricing Promotion Place (distribution) Personnel Presentation
• Presentation relates to the visual impact of a store on customers and its ability to generate high sales per square foot.
•Retailers must think of their stores as a stage, with sounds, lights, smells, props (fixtures), colors, and layout all supporting the atmospherics and theme of the store and the message it is try to convey.
© 2000 South-Western College Publishing
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GLOBAL RETAILING
The globe is becoming a single marketplace, with US retailers opening new stores outside the US, foreign retailers entering the US market, and the combining of retail entities and formats across national boundaries to the advantage of all parties
With the creation of NAFTA and the EC, tariff and trade barriers are disappearing.
© 2000 South-Western College Publishing
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TRENDS IN RETAILING INCLUDE...
Entertainment Convenience and
efficiency Share of customer The communications and
electronic revolution Consolidation and
integration Strategic alliances Internationalization ..and much, much more!