17 Retailing and Direct Marketing. Copyright © Houghton Mifflin Company. All rights reserved.17 | 2...

1717Retailing and Direct Marketing

Copyright © Houghton Mifflin Company. All rights reserved. 17 | 2

Agenda

• The Nature of Retailing

• Major Types of Retail Stores

• Direct Marketing

• Other Types of Nonstore Retailing

• Franchising

• Strategic Issues in Retailing


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.


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


Major Types of Retail Stores (cont’d)

• General-Merchandise Retailers (cont’d)– Supermarkets

• Large, self-service stores that carry a complete line of food products, along with some nonfood products

– Superstores• Giant retail outlets that carry food and nonfood

products found in supermarkets, as well as most routinely purchased consumer products



• General-Merchandise Retailers (cont’d)– Warehouse clubs

• Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing



• 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


Traditional Specialty Retailer

© Carol Lundeen



• Specialty Retailers (cont’d)– Off-price retailers

• Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts

• Charge less than 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 (“big box”)• Concentrate on a major product category and compete

on the basis of low prices and product availability


Examples of Category Killers

• Toys ‘R’ Us

• Home Depot

• Best Buy

• Office Depot

• PETsMart

• Barnes & Noble


Direct Marketing

• Nonstore Retailing– The selling of products outside the

confines of a retail facility

• Direct Marketing– The use of telephone

and nonpersonalmedia to introduceproducts to consumers,who then can purchasethem via mail, telephone,or the Internet


Direct Marketing (cont’d)

• 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.



• 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


Customers’ Reactions to Telemarketing Calls

Source: “Do Not Disturb,” American Demographics, May 2001, p. 28. Adapted with permission.

How can telemarketers be more effective in reaching customers?



• Television Home Shopping– A form of selling in which products are

presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card

• Online Retailing– Retailing that makes

products available to buyers through computer connections


Satisfaction Scores for Online Retailers

E-Retail Online Brand 2002 2003 % Change

Amazon.com 88 88 0%

Barnesandnoble.com 87 86 -1.1%

Buy.com 80 80 0%

1-800-Flowers.com 78 76 -2.6%

All others 82 83 1.2%

Average e-tailer 83 84 1.2%

American Customer Satisfaction Index Year-to-Year Comparison

Source: ACSI as reported in American Demographics, April 2004, p.16.


Satisfaction Scores for Online Retailers (cont’d)

American Customer Satisfaction Index Year-to-Year Comparison

Source: ACSI as reported in American Demographics, April 2004, p.16.

E-Travel Online Brand 2002 2003 % Change

Expedia 80 78 -2.5%

Orbitz 76 77 1.3%

Travelocity.com 76 76 0%

All others 77 77 0%

Average e-travel score 77 77 0%


Other Types of Nonstore Retailing

• Direct Selling– The marketing of products to ultimate consumers

through face-to-face sales presentations at home or in the workplace• “Door-to-door”• 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


Other Types of Nonstore Retailing (cont’d)

• Automatic Vending– The use of machines to dispense products– Can include 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


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.


Franchising (cont’d)

• Advantages–Enables 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


If You Had the Financial Resources to Purchase a Franchise, Which Company Would You Select? Why?

Reprinted with permission of Papa John’s International, Inc.


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– Traditional business districts


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.



• Nontraditional Shopping Centers– Factory outlet malls

• Feature discount and factory outlet stores carrying traditional brand name products

– Miniwarehouse mall• Loosely planned; lease space to retailers

running retail stores out of warehouse bays

– Nonanchored malls• Do not have traditional department store

anchors; combine off-price and category killer stores in a “power center” format



• 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


How to Succeed in Retailing as a Small Business

1. Differentiate your product from that of the other stores (avoid direct competition).

2. Determine your specific niche…you can’t please everyone.

3. Select a location with easy access and high visibility.

4. Offer products with selling features.

5. Train your employees to develop strong employee/customer relationships.

6. Plan store-related events to create excitement.

7. Focus your ad dollars on one medium versus inadequately buying many media.

Source: Reprinted with permission from Arthur Andersen Retailing Issues Letter, July 1995, Vol. 7, No. 4, p. 5. Used with permission.

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