Retailing: Bricks and Clicks

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Chapter Objectives

• Define retailing

• how retailing evolves

• Retail classifications

• Nonstore retailing

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Chapter Objectives

• B2C e-commerceits benefits, limitations, and future

promise

• store image positioning strategycreating a desirable image in the

marketplace

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Retailing: Special Delivery

• Retailing:

• the process by which goods and services are sold to consumers for their personal use

CABELA’S

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Retailing: Special Delivery

• The retailer adds/subtracts value from the offering

• with its image, • inventory, • service quality, • location, and • pricing policy.

CABELA’S

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Retailing: A Mixed (Shopping) Bag

• Retailing is big business: one of every five U.S. workers is employed in retailing.

BARNES and NOBLE

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Retailing: A Mixed (Shopping) Bag

• Retailers = final channel of distribution,

• providing utilities to customers time, place, and ownership.

BARNES and NOBLE

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The Evolution of Retailing

• The wheel-of-retailing hypothesisNew types of retailers

• enter the market • by offering lower-priced goods.

They gradually improve • facilities, quality and • assortment of merchandise, and amenities

and increase prices.

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The Evolution of Retailing (cont’d)

• The retail life cycleRetailers are born, grow and mature, and eventually

die or become obsolete.

Introduction stage Growth stage Maturity stage Decline stage

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

• Demographics: • retailers must find new ways to sell to diverse

groups.

convenience for working consumers

Catering to specific age segments

Recognizing ethnic diversity

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The Evolution Continues: What’s “In Store” for the Future? (cont’d)

• TechnologyInternet and e-tailingElectronic point-of-sale (POS) systemsCart-top computer

• to scan purchases as customers move through store

RFID tagsIntellifit System

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The Evolution Continues: What’s “In Store” for the Future? (cont’d)

• GlobalizationNeed to adjust to different conditions

• around the world

Innovative retailing concepts • developing overseas• influencing U.S. retailing

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Classifying Retail Stores

• what they sell: merchandise mix

• level of serviceSelf-service

Full-service

Limited service

NEIMAN MARCUS

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Classifying Retail Stores (cont’d)

• Classifying by merchandise selectionMerchandise assortment:

• selection of products a retailer sells

Merchandise breadth: • number of different product lines

Merchandise depth: • choices available in each product line

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Figure 16.1: Classification of Retailers by mdse. Selection

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Classifying Retail Stores (cont’d)

• Retail FormatConvenience stores

Supermarkets

Specialty stores

Discount stores

Warehouse clubs

Factory outlet stores

Department stores

Hypermarkets

KOHL’S

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Non-store Retailing

• Any method a firm uses

• to complete an exchange

• that does not require

• a customer to visit a store

LL BEAN

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Nonstore Retailing (cont’d)

• Direct sellingDoor-to-door salesParty plan systemMultilevel network:

• a master distributor recruits other people to become distributors

Illegal pyramid schemes: • people pay money to advance in company,

profiting from others who might join

• Automatic vendingAMWAY

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B2C E-commerce

• (B2C) e-commerce:

• online exchange • between companies & individual consumers

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B2C E-commerce

• Benefits of B2C e-commerceFacilitates global marketplace exchanges Increases consumer convenience fulfills experiential needs. For specialized businesses.price information available.reduce business costs.

DOGTOYS.COM

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B2C E-commerce (cont’d)

• Limitations of B2C e-commerceCustomers must wait

• to receive products.

poorly designed Sites. Security concerns.Internet fraud Can’t touch-and-feel”.

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B2C E-commerce (cont’d)

• More Limitations

• Firms need “bricks-and-mortar” presence to maintain base of loyal customers.

• Developing countries with cash economies can’t easily pay for Internet purchases.

PEAPOD.COM

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B2C E-commerce (cont’d)

• One More Limitation

• Online inventory

• may cannibalize

• major retailer store sales. (Victoria Secret catalog??)

PEAPOD.COM

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B2C’s Effect on the Future of Retailing

• Virtual channels unlikely to replace traditional ones.

• Stores must evolve to lure shoppers away from computers.

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B2C’s Effect on the Future of Retailing

• In destination retail, • consumers will visit stores • for total entertainment

experience.

• MOA & amusement park• West Edmonton Mall• Nike Store (Chicago)

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Retailing as Theater

• Store image: • the way a retailer • is perceived • in the marketplace • relative to the competition

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Retailing as Theater

• Store image: • Atmospherics: the use of:• color, lighting, • scents, furnishings, • sounds, other design elements • to create a desired setting

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Figure 16.2: Mapping a Store’s Personality

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Store Image (cont’d)

• Store design: setting the stageStore layout:

• arrangement of merchandise in store – determines traffic flow – (grid layout vs. free-flow layout)

Fixture typemerchandise densitysound of musicColor & lighting

• to set a mood

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Store Image (cont’d)

• Store personnel: should complement a

store’s image

• Pricing policyPrice points/ranges of store’s merchandise helps establish image

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Retailing as Theater (cont’d)

• Store locationTypes of store locations

• Business districts • Shopping centers• Freestanding retailers• Nontraditional store locations

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Retailing as Theater (cont’d)

• Store location (Site selection)• Store’s trade area:

–geographic zone that accounts for the majority of its sales and customers

–Primary – Secondary - Tertiary

•Saturated trade area•Understored trade area •Overstored trade area

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TOP RETAILERS

• www.stores.org

• Top 100 retailers (U.S)

• Top 200 global retailers

• Retailer of the year

• NRF conferenceNew York City - January

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Non-traditional retailing

• Tourism retailingSouvenir shops

• Museums, events, resorts

Shopping trips• MOA, Dallas, New York City

• Secondary retailingGarage salesThrift shopsConsignment retailers

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The end

• Go shopping

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Real People, Real Choices

• Eskimo Joe’s (Stan Clark)• A new Oklahoma law raised the legal drinking

age from 18 to 21.• How to ensure that Eskimo Joe’s would survive

the new law? Option 1: convert the beer bar into a full-service restaurant. Option 2: continue operating as a beer bar and offset declining beer sales with an increase in apparel sales. Option 3: close Eskimo Joe’s bar and refocus on building the growing apparel business.

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Real People, Real Choices

• Eskimo Joe’s (Stan Clark)• Stan chose option 1: convert

the beer bar to a full- service restaurant focused on selling great food.The success was immediate, and Stan

credits the result with paying close attention to the quality of food and service.

ESKIMOJOES.COM

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Discussion

• The wheel-of-retailing theory suggests the retailer’s normal path is to enter the marketplace with lower-priced goods and then increase quality, services, and prices. --Why do you think this happens? --Is it the right path for all retailers? --Why or why not?

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Discussion

• Wal-Mart has become a dominant retailer in the U.S. marketplace, accounting for over 30 percent of the total sales of some products. --Is this good for consumers? --For the retail industry?

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Discussion

• Department stores may be declining in popularity in the United States but remain the primary place to shop in other countries such as Japan.--Why do you think this is so?

--Can department stores in the U.S. turn this trend around?

MACY’S

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Group Activity

• You and two friends decide to open a combination coffee shop and bookstore near your college. To attract college students and other customers, you’ll need to carefully design the store image. --Develop a detailed plan that specifies how your group will use atmospherics to create the store image.

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Discussion

• Experts predict a rosy future for B2C e-commerce, with exponential increases in Internet sales of some product categories within a few years. --What effect do you think the growth of e-retailing will

have on traditional retailing? --In what ways will this be good for consumers, and in

what ways will it not be so good?

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Discussion

• Pyramid scheme promoters recruit at frenzied meetings that make potential members fearful of passing up a great opportunity if they don’t join.--Why do people continue to be lured into these

schemes?

--What do you think should be done to stop these unethical promoters?

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Discussion

• Macy’s and other stores use vending machines to sell electronics such as iPods.List other opportunities for vending

machine sales.

What are the negative and positive elements of vending sales?

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Group Activity

• Your team are business consultants for a chain of 37 traditional department stores in 12 Midwestern U.S. cities.

• The stores’ revenues have declined as specialty stores and hypermarkets have begun to squeeze them out. The chain has asked your group for suggestions to increase its business--Outline your recommendations and present them to the class.

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Group Activity

• Your client is a local caterer planning to open a new retail outlet selling take-out gourmet dinners.

• Your group of marketing consultants is examining locations: the central business district, a shopping center, a freestanding entity, or a nontraditional location. --Outline the advantages and disadvantages of each

type of location.

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Marketing Plan Exercise

• Think about a new retail venture, a specialty store that sells timepieces such as men’s and ladies’ watches and clocks. --What retailing strategies do you recommend for the

first two years of the business—what merchandise, what store image, and what location(s)?

--What long-term retailing strategies do you recommend?

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Marketing in Action Case:You Make the Call

• What is the decision facing IKEA?

• What factors are important in understanding this decision situation?

• What are the alternatives?

• What decision(s) do you recommend?

• What are some ways to implement your recommendation?