Chap 3-1

Marketing: Real People, Real Decisions
Retailing and E-tailing

Chapter 15
Lecture Slides
Solomon, Stuart,
Carson, & Smith
Your name here

Course title/number
Date
Chapter Learning Objectives
When you have completed your study of this chapter,
you should be able to:
• Define retailing and describe how retailers
evolve over time.
• Understand the importance of store image
to a retail positioning strategy, and explain
some of the actions a retailer can take to
create a desired image in the marketplace.
• Classify retailers by their selection of
merchandise.
• Describe the opportunities and barriers to
e-tailing.
• Describe the major forms of non-store
retailing.
©Copyright 2003 Pearson Education Canada Inc. 15-2
Introduction to the Topic
• Our previous discussion focused on distribution and the use of
marketing intermediaries to provide the place utility that consumers
are looking for. Most of the discussion was on middle companies.
• This chapter looks at the final step in
the distribution process, which is
retailing.
• Retailing is big business: 1 in 8
Canadians work in the over 180,000
stores in Canada, which represents
6.2% of the gross domestic product for
the country.
• Retailing is also changing, with new
forms emerging to suit the needs and
wants of today’s consumers.

Retailing
• Retailing: the final step in the distribution channel by which goods
and services are sold to consumers for their personal use.
• Retailing is a broad category that includes
traditional stores, as well as direct selling using
mail or in person, vending machines, catalogues,
and now electronic merchants via the Internet.
• Wheel-of-retailing hypothesis: a theory
that explains how retail firms change, becoming
more upscale as they go through their life cycle.
• This is based on the observation that many
retailers enter and gain a foothold in the market
by offering lower prices. These stores eventually
move upscale in response to new entrants.
• Sears, Zellers, and now Wal-Mart?

Trends in Retailing
• Retail life cycle: a process that focuses on the various retail life
cycle stages from introduction to decline. This is similar to the
product life cycle, except that it applies to retailers, not products.
• The points to recognize are that consumers
are easily bored, and good new ideas in
retailing are quickly copied by competitors.
• Future trends affecting retailing:
• Demographics:
– extra hours to cope with single parent
and dual career families,
– value-added services,
– catering to specific age groups
– recognizing ethnic diversity

Trends in Retailing (continued)
• Technology:
– The use of in-store video and computers to communicate with
shoppers.
– In-store price scanners to allow
consumers to check prices
– In-store terminals to allow
consumers to look up inventory
availability
– Wireless networks to allow
consumers to scan their own
purchases without line-ups.
– Holographic imaging to produce
exact sizing information, which
could be linked to a mass-
customization production system.
Trends in Retailing (continued)
• Point-of-sale (POS) systems: retail computer systems that
collect sales data and are hooked directly into the store’s inventory
control system.
• POS systems deserve a special mention for how they
have changed retailers’ operations since their
adoption.
• In the old days, retailers depended on price tags and
checkout people who could type them in on a cash
register, hopefully with some degree of accuracy.
• Inventory re-ordering was done by walking around
the store and looking for empty shelves, a slow and
inefficient process!
• Scanners have changed everything, allowing for
unprecedented control and quality of information.

Classifying Retailers by What They Sell
• Merchandise mix: the total set of all products offered for sale by
a firm, including all product lines sold to all consumer groups.
• Merchandise assortment: the range of products sold.
• Merchandise breadth: the number of different product lines
available.
• Merchandise depth: the
variety of choices available
for each specific product.
• Inventory turnover: the
average number of times a
year a retailers expects to sell
its inventory. Also known as
stock turns.
Figure 15.1

Classifying Retailers by Store Type
• Scrambled merchandising: a merchandising strategy that offers
consumers a mixture of merchandise items that are not directly related
to each other.
• Convenience stores: a small store located near a residential area
that is open long hours, seven days a week and carries a limited line of
high-turnover convenience goods.
• Supermarkets: large, low-
cost, low-margin, high-volume,
self-service stores that carry a
wide variety of food, laundry,
and household products.
• Loblaws, Provigo, and Sobeys
are the major players in this
industry.

• Specialty stores: a retail store that carries a narrow product line
with deep assortment within that line.
• Off-price retailers: retailers that buy excess merchandise from
well-known manufacturers and pass the savings on to customers.
• Warehouse (wholesale)
clubs: off-price retailers
that sell a limited selection of
brand-name grocery items,
appliances, clothing, and a
hodgepodge of other goods at
deep discounts to members
who may have to pay annual
membership fees to belong.

• Factory outlets: off-price retailing operations that are owned and
operated by manufacturers and that normally carry the manufacturer’s
surplus, discontinued, or irregular goods.
• These types of outlets sometimes congregate
in small towns to become a destination for
shopping. Examples: North Conway, New
Hampshire, or Kittery, Maine.
• Department stores: a retail organization
that carries a wide variety of product lines-
typically clothing, home furnishings, and
household goods. Each line is operated as a
separate department managed by specialist
buyers or merchandisers.
• Examples: Sears, Zellers, and Wal-Mart

• Superstore: a store almost twice the size of a regular
supermarket that carries a large assortment of routinely purchased
food and non-food items, and offers such services as dry cleaning,
post offices, photo-finishing, cheque cashing, bill paying, lunch
counters, and car or pet care.
• Hypermarkets: retailers with the
characteristics of both warehouse stores and
supermarkets; hypermarkets are several times
larger than other stores and offer virtually
everything from grocery items to electronics.
• These types of stores are more popular in
Europe and Latin America.
• The question for the future will be: what
happens when people decide they don’t want to
do all of the walking necessary to shop in these
large stores?
Retailing as Theatre
• Today’s consumers want not only to acquire the goods they are looking
for, but also to be entertained while they are doing it.
• Store image: the way a retailer is perceived in the marketplace
relative to the competition. The image of the store should be consistent
with the products sold and the interests of the target markets selected.
• Atmospherics: the use of

colour, lighting, scents,
furnishings, and other design
elements to create a desired
store image.
• The goal is to get consumers
to stay in the store longer,
because this equates to more
money spent.

Retail Store Design
• Store design is important to creating the image that the retailer
wishes to convey as well as providing the functional elements that
facilitate the storage and display of merchandise, as well as the
movement of people through its spaces.
• Observational research can be used to help design stores that work
better.
• Traffic flow: the direction in
which shoppers move through the
store and what areas they pass or
avoid.
• Modern grocery stores place the
staple products at the four corners
to encourage customers to walk
through the whole store, which
encourages impulse buying. Figure 15.2

Retail Store Design (continued)
• Other aspects of store design:
– Fixture type
– Merchandise density
– Sounds and music used
– Colour and lighting
• Store personnel:
– Number available
– Quality of service provided
including friendliness, empathy,
and knowledge of products.
– This can be difficult, given the low wages typically paid to
young people, who make up the largest group working retail.
• The store design and atmospherics should also be consistent with
the pricing policy used.

Retail Store Location
• Store location is very important to attracting the consumers that
are being targeted by the retailer. There are many factors that
influence how this decision is made, including the nature of the
products sold, the customers, costs, and availability.
• Four types of locations:
– Business districts
– Shopping centres
– Free-standing retailers, in or out of
retail parks.
– Non-traditional locations, such as
carts or kiosks in high traffic areas.
• Trade area: a geographic zone that
accounts for the majority of a store’s
sales and customers.

E-tailing and Non-Store Retailing
• Non-store retailing: any method used to complete an exchange
with a product end user that does not require a customer visit to a
store. Can include direct marketing using television, mail, people, or
the Internet, catalogues, and vending machines.
• E-tailing: offering products for
sale directly to consumers via the
Internet. Originally known as e-
commerce.
• Direct marketing: exposing a
consumer to information about a
good or service through a non-
personal medium and convincing
the customer to respond with an
order.

Benefits to Consumers of E-tailing
• E-tailing offers consumers a number of benefits which helps to
explain its popularity.
• Amazon.com was one
of the early pioneers
of e-tailing, who have
struggled to make a
profit despite their
size and volume.
• Bots: electronic
robots or shopping
agents that help
consumers find
products and prices
on the Internet.
Figure 15.5

Factors Limiting E-tailing
• There are still a number of factors that limit the success of e-tailing
via the Internet.
• One of the
biggest problems
is the lack of
differentiation
between e-
tailers, which
forces them into
competing on
the basis of
price, which kills
any hope of
profitability.
Figure 15.4

Products Suited to E-tailing
Table 15.1

Other Aspects of E-tailing
• Push technology: Internet tools that allow marketers to send
information they think is relevant to consumers directly to their
computers.
• Portals: gateways to the Internet that assist consumers to navigate
the Internet and customize their experience.
• Webcast: real-time transmission

of encoded video under the control
of a server to multiple recipients,
who all receive the same content at
the same time.
• Scalability: the ability of
organizations to get bigger without
a big rise in expenses.

Other Forms of Non-store Retailing
• Catalogue: a collection of products offered for sale in book form,
usually consisting of product descriptions accompanied by photos or
illustrations of the items.
• Catalogues have benefited from the Internet, as it saves them on the
costs of printing and mailing, and allows for faster updating of pricing
and availability of products offered.
• Direct mail: a brochure or
pamphlet offering offering a
specific product or service at one
point in time.
• Also known as junk mail, this
industry has developed much more
precise ways to target individuals
using geodemographic information.

Direct Selling
• Direct selling: an interactive sales process, in which a salesperson
presents a product to one individual or a small group, takes orders, and
delivers the merchandise.
• Party plan system: a sales technique that relies heavily on people
getting caught up in the “group spirit” buying things they would not
normally buy if alone. Example: Tupperware uses this technique.
• Multilevel marketing: a system

in which a master distributor recruits
other people to become distributors,
sells the company’s products to
recruits and receives commission on
all the merchandise they sell.
• Examples: Amway, Melaluca

Other Forms of Non-store Retailing
• Pyramid schemes: an illegal sales technique, in which the initial
distributors profit by selling merchandise to other distributors, with the
result that consumers buy very little product.
• Telemarketing: a sales technique, in
which direct selling is conducted over the
telephone.
• Automatic vending: using vending
machines to distribute products directly to
consumers. Used extensively for, but not
limited to snack foods and beverages.
• Direct-response TV: television
programming, such as infomercials or
shopping channels, that elicits direct orders for
products from the viewing public.

Famous Last Words…
• Retailing is a fast-paced
industry that is attempting
to adapt itself to the whims
of the consumer.
• Today’s consumers want it
all, and they want to be
entertained while they are
doing it.
• The trick is trying to stay
ahead of these trends.

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Chap 3-1

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Marketing: Real People, Real Decisions

Retailing and E-tailing

Your name here

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• Atmospherics: the use of

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• Webcast: real-time transmission

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• Multilevel marketing: a system

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