Chapter 16 Retailing: Bricks and Clicks. Copyright 2009 Pearson Education, Inc. Publishing as...

Chapter 16

Retailing:Bricks and Clicks

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-2

Chapter Objectives

Define retailing; understand how retailing evolves and some ethical issues in retailing

Understand how we classify retailers Describe the more common forms of

nonstore retailing Describe B2C e-commerce and its benefits,

limitations, and future promise Understand the importance of store image

and how a retailer can create a desirable image


Real People, Real Choices: Decision Time at Eskimo Joe’s

Which strategy should Stan pursue? – Option 1: Convert the beer bar into a full-

service restaurant– Option 2: Continue operating as a beer bar

and try to offset lost beer sales with an increase in apparel sales

– Option 3: Close Eskimo Joe’s and refocus resources on building the growing apparel business


Retailing: Special Delivery

Retailing: The process by which goods and services are sold to consumers for their personal use– The retailer adds or subtracts value from the

offering with its image, inventory, service quality, location, and pricing policy


Retailing: A Mixed (Shopping) Bag

Retailing is big business:– 2007 U.S. sales totaled $4.5 trillion– More than one of every ten U.S. workers is

employed in retailing

Retailers belong to a channel of distribution, providing time, place, and ownership utility to customers


The Evolution of Retailing

The wheel-of-retailing hypothesis– Theory that explains how retail firms change,

becoming more upscale as they go through their life cycle

• New types of retailers enter the market by offering lower-priced goods

• They gradually improve facilities, quality and assortment of merchandise, and amenities as they increase prices


The Evolution of Retailing

The retail life cycle– Retailers are born, grow and mature, and

eventually die or become obsolete• Introduction stage: Aggressive entrepreneurs,

pop-up retailers• Growth stage: Sales grow, competition enters,

stores must expand offerings• Maturity stage: Multiple competitors, profits

decline, new products are offered• Decline stage: Retail offerings become

obsolete


The Evolution Continues: What’s “In Store” for the Future?

Factors motivating retail innovation:– Demographics:

Retailers must find new ways to sell to diverse groups• Offering convenience for working

consumers

• Catering to specific age segments

• Recognizing ethnic diversity



Factors motivating retail innovation: – Technology:

Changing the shopping experience• Internet created the e-tailing age

• Point-of-sale system advances

• Social shopping

• RFID chips

• E-menus



Factors motivating retail innovation:– Globalization:

Offers access to growth markets, but firms need to adjust to different conditions around the world• Merchandise mix changes

• Local production requirements

• Cultural differences

• Competition


Ethical Problems in Retailing

Shrinkage problems may stem from customers or employees:– Shoplifting– Employee theft– Retail borrowing

Ethical issues in customer dealings:– Discouraging certain types of customers from

shopping– Selling harmful products to

at risk groups


Classifying Retail Stores

The classification of retail stores provides a method by which retailers can benchmark performance

Several classification methods exist:– Classifying by what they sell (the

merchandise mix)– Classifying by level of service– Classifying by merchandise selection



Classifying by what they sell (the merchandise mix)– Merchandise mix:

The total set of products offered for sale by a retailer, including all product lines sold to all consumer groups. Example: food retailers

– Difficult to use for benchmarking due to merchandise overlap between different store types (e.g., “Super” Wal-Marts carry food)



Classifying by level of service– Self-service retailers:

Shoppers make selections without any help– Limited service retailers:

May offer credit service and merchandise return services but little else; the majority of shopper selection is done without assistance

– Full-service retailers:Offer supporting services such as gift wrapping; trained sales associates assist buyers



Classifying by merchandise selection uses two dimensions:– Merchandise breadth:

Number of different product lines – Merchandise depth:

Choices available in each product line

Retailers classified in this manner take several forms



Major forms retailers take:– Convenience stores – Supermarkets– Specialty stores– Discount stores

• General merchandise discount stores• Warehouse clubs• Factory outlet stores

– Department stores– Hypermarkets


Nonstore Retailing

Nonstore retailing:Any method used to make an exchange with a product end user that does not require a customer visit to a store

One type is direct selling: – An interactive sales process in which a

salesperson presents a product to one individual or a small group, takes orders, and delivers merchandise


Nonstore Retailing

Forms of direct selling – Door-to-door sales– Party plan system– Multilevel networking (a master distributor

recruits other people to become distributors) • Beware of illegal pyramid schemes: These

promise large profits from recruiting others to join the program rather than from any real investment or sale of goods

– Automatic vending


B2C E-Commerce

Business-to-consumer (B2C) e-commerce: Online exchange between companies and individual consumers


B2C E-Commerce

Benefits to firm of B2C e-commerce– Facilitates exchanges in global marketplace– Allows businesses to reduce costs– Allows specialized businesses to succeed– Makes real-time price information easily

available


B2C E-Commerce

Consumer benefits of B2C e-commerce– Increases convenience for consumers

• 24/7 shopping, less traveling

– Greater product access and choice– Greater, faster access to information

• Pricing information, electronic communities

– Lower prices; virtual auctions– Fast delivery– Can fulfill experiential needs


B2C E-Commerce

Limitations of B2C e-commerce from the firm’s perspective– Security challenges and constant site

maintenance– Developing countries with cash economies

can’t easily pay for Internet purchases – Online sales may cannibalize major retailer

store sales– Price competition is intense


B2C E-Commerce

Limitations of B2C e-commerce from consumer perspective– Must wait for delivery of non-digital goods– Lack of security and potential for fraud – No chance to “touch-and-feel” goods– Poor color reproduction on the Internet– Expensive to return items– Potential exists for a breakdown in human

relationships


B2C’s Effect on Retailing’s Future

Virtual channels are unlikely to replace traditional ones

Stores must continue to evolve to lure shoppers away from computers– In destination retailing, consumers will visit

stores for the total entertainment experience


Developing a Store Positioning Strategy:

Retailing as Theater

Shopping is part buying, part entertainment, and part social outlet

Store image: The way a retailer is perceived in the marketplace relative to the competition– Atmospherics:

The use of color, lighting, scents, furnishings, sounds, and other design elements to create a desired store image




Store design: setting the stage– Store layout:

Arrangement of merchandise in the store that determines traffic flow (grid layout vs. free-flow layout)

– Fixture type and merchandise density– The choice of music– Color and lighting (set a moods)




Store personnel should complement a store’s image– Dress, attitude, and knowledge are important

Pricing policy– Price points are price ranges of a store’s

merchandise – Price points play a role in establishing its

image




Build the theatre: store location– Types of store locations

• Business districts

• Shopping centers

• Freestanding retailers

• Nontraditional store locations

– Site selection is critical• “Location, location, location”




Build the theatre: store location– Site selection must take into account the

store’s trade area, or geographic zone that accounts for the majority of its sales and customers

• Saturated trade areas• Understored trade areas• Overstored trade areas


Real People, Real Choices: Decision Made at Woodtronics

Stan chose option 1– Implementation: Eskimo Joe’s reopened as a

trendy restaurant, and achieved immediate success. Stan only hires employees who fit the business culture he developed. Apparel sales continue to grow

– Measuring success: Table turnover, average sale per customers for restaurant; profit per square foot for clothing sales


Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Chapter 16 Retailing: Bricks and Clicks. Copyright 2009 Pearson Education, Inc. Publishing as...

Documents

Transcript of Chapter 16 Retailing: Bricks and Clicks. Copyright 2009 Pearson Education, Inc. Publishing as...