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Supplementary Slides (optional reading)

Retailing Concepts

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Supplementary Slides on Retailing Concepts

• The next set of slides are from my own general marketing course notes.

• You can have a quick overview of what retailing is all about, what are the key concepts and classification of retailing and what trends are happening in the world of retailing.

• Understand the changes taking place in the world of retailing

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Types of Retailers

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There shouldn’t be a standard interpretation o of retailing: it can come in many forms

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Types of Retailers

Retailers are classified based on:

Amount of Service They Offer

Breadth & Depth of Product Lines

Relative Prices Charged

How They Are Organized

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Amount of Service

• Self-Service Retailers:

– Serve customers who are willing to perform their own “locate-compare-select” process to save money.

• Limited-Service Retailers:

– Provide more sales assistance because they carry more shopping goods about which customers need information.

• Full-Service Retailers:

– Usually carry more specialty goods for which customers like to be “waited on.”

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Product Line Classification

Specialty Stores:Carry narrow product lines with deep assortmentswithin those lines.

Department Stores:Carry a wide variety of product lines—typically clothing, home furnishings, and household goods.Each line is operated as a separate departmentmanaged by specialist buyers or merchandisers.

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Product Line Classification

Supermarket:Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products.

Convenience Stores:Small stores located near residential areas that are open long hours 7 days a week and carrya limited line of high-turnover convenience goods.

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Product Line Classification

Superstores:Much larger than regular supermarkets and offer a large assortment of routinely purchasedfood products, nonfood items, and services.

Category Killers:Giant specialty stores that carry a very deepassortment of a particular line and is staffedby knowledgeable employees.

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Relative Prices Classification

Discount Store:A retail institution that sells standard merchandiseat lower prices by accepting lower margins andselling at higher volume.

Off-Price Retailer:Retailer that buys at less-than-regular wholesaleprices and sells at less than retail. Examples arefactory outlets, independents, and warehouse clubs.

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Relative Prices Classification

Factory Outlet:Off-price retailing operation that is owned and operated by a manufacturer and that normallycarries the manufacturer’s surplus, discontinued,or irregular goods.

Independent Off-Price Retailer:Off-price retailer that is either owned and run byentrepreneurs or is a division of a larger retailoperation.

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Relative Prices Classification

Warehouse Club:Off-price retailer that sells a limited selection ofbrand-name grocery items, appliances, clothing,and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

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Organizational Classification

Chain Stores:Two or more outlets that are owned and controlled,have central buying and merchandising, and sell similar lines of merchandise.

Voluntary Chain:A wholesaler-sponsored group of independentretailers that engages in bulk buying and commonmerchandising.

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Watson is part of a chain of stores

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Organizational Classification

Retailer Cooperative:A group of independent retailers that bands together to set up a jointly owned, centralwholesale operation and conducts jointmerchandising and promotion efforts.

Franchise:A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) whobuy the right to own and operate one or moreunits in the franchise system.

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Examples of Franchise Operations:

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How Do Retailers Create Value?

� Consumers have changed their preference for price and quality

� Lifestyles have become more casual� Retailers must

go beyond low price to create value

� Mustafa Store� 24/7 � Wide merchandise� Competitive prices Mustafa Store Singapore

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Using the Four P’s to Create Value in Retailing

Product, price, promotion, place

$ $

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Retailer Marketing Decisions

Figure 11.1

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Assortment and Services Decisions

Product Assortment:Brand of merchandiseMerchandising events

Services Mix:

differentiation

Services Mix:Different numbers and types of services are key to non-price store

differentiation

Store Atmosphere:Physical layout and “feel” of the store

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Price, Promotion, & Place Decisions

Price strategy must fit its target market and positioning, product and service assortment, and competition

Can use any or all of the promotion tools—advertising,personal selling, sales promotion, public relations,

and direct marketing—to reach consumers

Retailers can locate in CBDs, various types ofshopping centers, malls or in the heartland location

Product

Providing the right mix of merchandise and services

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Harvey Norman and Audio House both carry wide ranges of consumer electronics - they compete both on the product lines and prices

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Retail stores communicate the brand’s positioning strategy. Here we see examples of the entrances to a Louis Vuitton store exuding every bit of opulence to complement the prestige of the product

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Store presentation communicates the brand

Size of displays

“creating anticipation”

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How does the Apple Store layout and presentation communicate the brand?

Price

Price defines the value of both the merchandise and the service

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Retailers compete on many different aspects other than just price

Promotion

Retailers use a wide variety of promotions, both within their retail

environment and through mass media

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Promotions used by local retailers

Place (location)

Convenience is a key ingredient to success

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Changes in retailing trends

1. New Retail Forms and Shortening Retail Life Cycles

2. Growth of Non-store Retailing

3. Retail Convergence

4. Rise of the Mega-retailers

5. Growing Importance of Retail Technology

6. Global Expansion of Major Retailers

7. Retail Stores as “Communities” or “Hangouts

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New retailing forms

• As a result of changes in consumer shopping patterns, new types of retail formats will arise

• And some will diminish because retail types do have life cycles

• Specialty stores appear to favor certain consumer segments

• Think of the following– Popularity of small stores in Orchard CineLeisure– Phenomenal growth of the Petrol Station as a major

retailing point– Decline in popularity of the traditional department store

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Petrol Station Retailing

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Decline in department store popularityStraits Times 9/May/2009

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Growth in non -store retailing

• Products and services available without the need for a store– Internet– Kiosks– Catalogue Marketing

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Retail Convergence

• Retail convergence is when many retailers of the same products coexist within a convenient location of the consumer without much differentiation in price.

• One example of retail convergence would be a shopping mall where consumers can compare pricing and models at different locations less than a quarter mile from another store.

• The world's largest retail convergence has already begun, it is called the Internet.

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Examples of retail convergence

Sim Lim Square

Queensway Shopping Centre

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The Changing Retail Landscape

The Big Middle: Part of the market where most firms compete

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Mega-Retailers

• Have tremendous economic power• Brand name attracts large number of shoppers• Sales volume enables the mega-retailer to buy in

bulk• Stronger bargaining power with suppliers• An example where the retailer (instead of the

manufacturer can exercise ‘channel power’

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Large retailers often compete with the manufacturer by introducing their own brands

• Private label brands• The manufacturer will need to

compete with the private brand in the stores

• Battle for shelf space• Private label brands may be lower in

quality but more attractive in price• Value brands

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Growing importance of Retail Technology

• Using technology for all aspects of distribution• Supply chain: using IT to help plan for inventory

levels and deliveries• RFID (radio frequency identification) on packages• Using the internet to access customers on-line

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RFID in retailing and supply chain

• Tracking items in the store• See this YouTube example of how HP uses RFID

technology for buyers and for connecting to its supply chain

http://www.youtube.com/watch?v=1EfMdD2eIgs

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Global Expansion of Retailers

• Many retailers from the US and Europe has expanded overseas and have become household brand names

RMT students will do an advanced subject in year 3 on International Marketing and Retailing

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Retailing as a ‘customer experience’

• The store is not just a place to display merchandise• It is where customers come into contact with the

brands and the store staff• Customer interface and interaction helps to bring

about a good or bad customer experiences• Customers want something more than just the

product– Information– Sampling the product– Feeling good– Remember the ‘augmented product?’

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Apple stores provide positive customer experiences

“high-tech and high-touch experiences”

The store environment, visual merchandising and customer service all contribute towards creating an exciting and engaging customer experience

Creating experiences in the store : Build-a-Bear example

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Many retail outlets such as Starbucks have become p laces for customer hangouts

Internet and Electronic Retailing

Bricks and mortar

Multichannel retailers

Many retailers use the internet to complement the traditional store retailing

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Entrepreneurial Marketing : Jeff Bezos Building Amazon.com

� Plan for an extensive, on-stop Internet catalog for books

� Wanted to create the “world’s most customer centric company. The place where people come to find and discover anything they might want to buy online.”

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What are the benefits of the Internet in Retailing?

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But there are also obstacles to internet retailing

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