RETAILING AN OUTLOOK

THE WORLD OF RETAILING

Introduction to Retailing
Types of Retailers Multi-Channel Retailing

Customer Buying Behavior

WHAT IS RETAILING?

Includes all the activities Involved in Selling Goods or Services Directly to Final Consumers

RETAILING IS SELLING

HISTORY
Need for food, water, and bodily comforts. Human aggressiveness. Trade was an outgrowth of friendly gift giving. People who had more goods than they could consume traded the excess away.

CLASSIFICATION OF RETAILING
Self-Service, Limited-Service and Full-Service Retailer Length and Breadth of the Product Assortment Pricing Structure that is Used by the Retailer Independent, Corporate, or Contractual Ownership Organization

Amount of Service

Product Line

Relative Prices

Retail Organizations

CLASSIFICATION OF RETAILING:

AMOUNT OF SERVICE
Self-Service Retailer
Provide Few or No Services to Shoppers i.e. Mini Market

Limited-Service Retailers
Provide Only a Limited Number of Services to Shoppers i.e. Watson Full-Service

Retailers
Retailers that Provide a Full Range of Services to Shoppers i.e. Tesco

CLASSIFICATION OF RETAILING:

PRODUCT LINE
Store
Specialty Stores Department Stores

Description
Narrow Product Line, Deep Assortment i.e. GS Gills or Athletes Outlet Wide Variety of Product Lines i.e. Clothing, Home Furnishings,(Jasco)

Convenience Stores

Limited Line of High-Turnover Convenience Goods i.e. 7-Eleven

Standard Merchandise at Lower Prices i.e. Macro
Changing Collection of Higher-Quality Goods at a Reduced Price i.e. Factory Outlet (FOS)

Discount Stores Off-Price Retailers Warehouse Clubs

Limited Selection of Brand-Name Grocery Items, Appliances, Etc. i.e. Reject Shop

CLASSIFICATION OF RETAILING:

RELATIVE PRICES
Higher Prices and Offer Higher-Quality Goods and Customer Service

Regular Prices and Offer Normal-Quality Goods and Customer Service

Low Prices and Offer Lower-Quality Goods and Customer Service

Discount Stores Off-Priced Retailers Catalog Showrooms

DEPARTMENT STORES (1)

Service Level High

Assortment Broad

Price
High

Gross Margin High

SPECIALTY STORES (2)

Specialty Stores

Type of Retailer Specialty Store

Service Level High

Assortment Narrow

Price High

Gross Margin High

SPECIALTY DISCOUNT STORES (3) OR CATEGORY KILLERS

Specialty Discount Stores

Type of Retailer

Service Level

Assortment Narrow

Price Low

Gross Margin Low

Specialty Discount Store Low

Deep Assortment

DISCOUNT STORES (4)

Discount

Low Service

Broad Assortment

Low price

Low margin

Shallow Assortment

OFF-PRICE RETAILER (5)

Off-price Retailer

Low service

Narrow Line LowPrices Low margins prices

WAREHOUSE CLUBS

Warehouse club / wholesale club (Sams, Costco)

No frills, members only (why?) Bulk purchases: price competition, homogeneous shopping goods

CONVENIENCE STORES
Convenience

products Often with gas stations

Convenience stores: fill-in your regular shopping

Competition (fast food also) 24/7 is more important We pay for the convenience

MULTI CHANNEL RETAILING

MULTI CHANNELS

Designer shops Off pricers ( Factory outlets) Shop in shop Departmental store Discount stores Spin offs E Retailing Catalogue Retailing Direct mail TV Tele retailing

OVER SEAS EXPANSION (WHY?)

More profits Crowded domestic market Overseas market gives capacity advantage.

OVER SEAS EXPANSION

Wholly owned subsidiaries. Franchise arrangements Licensed Joint venture

OFF SITE RETAILING

NATURE OF RETAIL INDUSTRY IS CHANGING

To Todays Retailer

Mom and Pop Store

AIMS
This topic seeks to:

compare traditional and electronic retailing;

identify the benefits of electronic retailing (e-retailing); examine the key successes and factors;

introduce models & features of e-retailing;

23

TRADITIONAL RETAILING
Selling to a final customer through a physical outlet or through direct communication e.g.:

Mall management provides physical location where a retailer can create an outlet; Generalised stores have a unified management but carry different product lines; Specialised stores sell a specific product line;

Malls collection of individual stores, individually managed.

24

TRADITIONAL RETAILING (CNTD)

individual store may be run by a different management, with a fee paid back to franchisee. Direct mailing catalogue is sent to customer, who then send a mail order.
Other forms: telemarketing; door-to-door sales; vending machines;

Franchise stores a single marketing and brand, but

have moved away from physical outlet to virtual retailing.

25

RETAILING TO E-RETAILING
E-retailing results from mapping traditional retailing to the new medium of the internet:

Specialised stores -> specialised e-stores;

Generalised stores -> generalised e-stores;

Malls -> E-malls; Franchise stores -> ?

26

NEW CLASSES OF E-RETAILING

E-brokers - bring together customers and suppliers.

do not sell directly; match customers requests to e-retailers; search is based on attributes supplied by the consumer e.g. cheapest price; important now (name-your-price) & in the future.

27

NEW CLASSES OF E-RETAILING (CNTD)

Direct selling by manufacturer:

permits mass customisation; reduced costs; new specialised products.

28

BENEFITS OF E-RETAILING
To the customer:

convenience; better information; competitive pricing; customisation; shopping anywhere, anytime.

29

BENEFITS OF E-RETAILING (CNTD)

To the e-retailer:

global reach; better customer service; low capital cost; mass customisation; targeted marketing;

more value added services;

new forms of specialised stores and niche marketing.
30

FEATURES OF E-RETAILING
Important features of an e-shop:

On-line catalogue for goods, linked to the order process ;

Provision of a search engine for products; Shopping cart, for good selection and automatic price update; Personalisation of store layouts, promotions and marketing; An online contact person;

Order status checking facility;

Use of forums and customer communities.
31

E-RETAILING MODELS

Specialised e-store; Generalised e-store; E-mall; Direct Selling by the manufacturer; E-broker; E-services.

32

E-RETAILING SITES
Examples include:

Exercise: Match examples to categories of models summarised in the previous slide.

Amazon.com; Walmart;

Yahoo!Store;
dell.com; ba.com; Priceline.com

33

ELECTRONIC COMMERCE

Categories of Electronic Commerce

Business-to-customer (B2C): Retailing

of products and services directly to individual customers

Business-to-business (B2B): Sales of

goods and services among businesses

Consumer-to-consumer (C2C):
Individuals use Web for private sales or exchange

ELECTRONIC COMMERCE

Benefits of Disintermediation to the Consumer

Cost/ Sweate r

Manufacturer

Distributor

Retailer

Customer

$48.50

Manufacturer

Retailer

Customer

$40.34

Manufacturer

Customer

$20.45

Figure 4-2

THE END

Essentials of Management Information Systems

Chapter 4 Electronic Commerce & Electronic Business ELECTRONIC COMMERCE

Electronic Commerce Payment Systems

SYSTEM CREDIT CARDS DESCRIPTION SECURE SITE PRESERVES INFORMATION

ELECTRONIC CASH

DIGITAL CURRENCY USED FOR MICROPAYMENTS

PERSON-TO-PERSON

SEND MONEY TO SITES UNABLE TO USE CREDIT CARDS

DIGITAL WALLET

SOFTWARE STORES CREDIT CARD INFORMATION

ELECTRONIC CHECK

CHECK WITH ENCRIPTED DIGITAL SIGNATURE

SMART CARD

MICROCHIP STORES ELECTRONIC CASH

ELECTRONIC BILL PAYMENT

ELECTRONIC FUNDS TRANSFER

DECISION VARIABLES FOR RETAILERS

Customer Service

Store Design and Display

Retail
Strategy

Merchandise Assortment

Pricing

Location

Communication Mix

CHAPTER 12
Retailing and Wholesaling

RETAILER MARKETING DECISIONS

Retailer Strategy

Retailer Marketing Mix

Product and service assortment Prices

Target Market
Retail Store Positioning

Promotion
Place (location)

PRODUCT ASSORTMENT AND SERVICES DECISIONS

Width and Depth of Assortment

Product Assortment

Quality of Products Product Differentiation Strategies

Key Tool of Nonprice Competition for Setting One Store Apart From Another
Physical Layout

Services Mix

Stores Atmosphere

Feel That Suits the Target Market and Moves Customers to Buy

RETAILERS PRICE, PROMOTION, AND PLACE DECISIONS

Price Decisions Promotion Decisions

Target Market, Product & Service Assortment, Competition

Using Advertising, Personal Selling, Sales Promotion, Public Relations, & Direct Marketing to Reach Customers

Place Decisions
Shopping Centers, Central Business Districts, or Power Centers, or Online Shopping

THE FUTURE OF RETAILING

New Retail Forms and Shortening Retail Lifecycle Growth of Nonstore Retailing Increasing Intertype Competition Rise of Megaretailer Growing Importance of Retail Technology Global Expansion of Major Retailers Retail Stores as Communities or Hangouts

THE WHEEL OF RETAILING

High Margin High Price High Status

1 2 1 2 3 4 3
Low Margin Low Price Low Status

1 = Discount 2 = Superstore 3 = Warehouse Club 4 = Combination Store

WHAT IS WHOLESALING?
All

the activities involved in selling goods and services to those buying for resale or business use. Wholesaler - those firms engaged primarily in wholesaling activity. Wholesalers buy mostly from producers and sell mostly to:

Retailers, Industrial consumers, and Other wholesalers.

WHY ARE WHOLESALERS USED?

Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Management Services & Advice Market Information Risk Bearing Financing Transportation Selling and Promoting

Wholesaler Functions

Buying and Assortment Building Bulk Breaking

Warehousing

TYPES OF WHOLESALERS
Independently Owned Business that Takes Title to the Merchandise it Handles.

Merchant Wholesaler

Manufacturers Sales Branches and Offices

Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

They Dont Take Title to the Goods, and They Perform Only a Few Functions.

Brokers/ Agents

WHOLESALER MARKETING DECISIONS

Wholesaler Strategy Target Market Service Positioning Wholesaler Marketing Mix

Product and service assortment

Prices Promotion Place (location)

TRENDS IN WHOLESALING
Consolidation within the Industry is Reducing # of Wholesalers

Distinction Between Large Retailers and Wholesalers Blurs

Wholesalers Will Continue to Increase the Services Provided

Wholesalers Are Beginning to Go Global

REST STOP:

REVIEW OF CONCEPT CONNECTIONS

1.

2.

3.

4.

Explain the roles of retailers and wholesalers in the distribution channel. Describe the major types of retailers and give examples of each. Identify the major types of wholesalers and give examples of each. Explain the marketing decisions facing retailers and wholesalers.

SEE YOU NEXT..IN CHAPTER 13

INTRODUCTION

Retailer

An intermediary involved in selling goods and services to ultimate consumers (examples?)

Wholesaler

An intermediary that takes title to the goods it handles and redistributes them to retailers, other distributors, and sometimes end consumers

Employs 15 million people in the U.S. Accounts for $4.5 trillion to the U.S. economy

STRATEGIC IMPLICATIONS: RETAIL MARKETING STRATEGY

A retailer develops a marketing strategy based on the firms goals and strategic plans Two fundamental steps:
Picking a target market: size and profit potential. POSITION. 2. Developing a retailing mix to satisfy the chosen target market
1.
1.

4Ps + Personnel & Presentation used to create a retail image

THE RETAILING MIX

Product
Personnel Place

Target Market
Presentation Promotion

Price

CHOOSING THE MERCHANDISING MIX

The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.

MERCHANDISING (PRODUCT) STRATEGY

Category management: Retailing strategy which views each product category as an individual profit center. Slotting Allowances: lump-sum payments by manufacturers for stocking new products. Scrambled Merchandising: Combining dissimilar product lines to boost sales volume. Growth of Store brands Battle for shelf space

PRESENTATION OF THE RETAIL STORE ATMOSPHERE

The overall impression conveyed by a stores physical layout, dcor, and surroundings. Five Senses.

PERSONNEL AND CUSTOMER SERVICE

Two Common Selling Techniques

Trading Up

Suggestion Selling

PRICE

The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.
Price and payment options : how important? http://www.youtube.com/watch?v=kMimygVTgbU

CLASSIFICATION OF RETAIL BY
1.

2.
3. 4.

Ownership (independent, franchise chain) Service level (Nordstrom vs. Wal-mart) Assortment (CVS vs. Smiths) Price (Tiffany vs. jewelry kiosk)

WHEEL OF RETAILING
Newer,

low-price types of retailing arise to challenge older established bigger retailers.

WHEEL OF RETAILING
Motel
+ Free Breakfast + HBO

Motel
+ Free Breakfast + HBO + Happy Hour

2
Motel
+ Free Breakfast

New Entrant

No Frills Motel

a theory to explain the institutional changes

ETAILING AND

DTC

eTail= electronic retail DTC= Direct to consumer Shrinking use of wholesalers? (bypassing wholesalers more and more) eBay: hybrid etailer/online auction site Even sells services online (examples of services on ebay?)

ETAIL

More innovative e-tail sites Printing online www.printresponsibly.com Nike ID http://nikeid.nike.com Zappos http://www.zappos.com

FUTURE OF RE[E]TAILING
http://www.youtube.com/watch?v=jtiJaX6q

1i0

RETAIL MARKETING MIX AND PLANNING

Charles Blankson, Ph.D.

THE NATURE OF RETAIL MARKETING

The key aspects of retail marketing is an attitude of mind. In making retail marketing decisions, retailers must consider the needs of the customers. Retail marketing decisions are driven by what the shoppers need and want. 2

THE NATURE OF RETAIL MARKETING

Retail marketing is therefore a philosophy and is all about satisfying the customers What the customers regard as value and what they buy is decisive. What the customers buy determines the nature of the retailers business. 3

THE NATURE OF RETAIL MARKETING

The

essence of retail marketing is developing merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits. must take the customers needs into consideration in retail operation. 4

Retailers

THE NATURE OF RETAIL MARKETING

Retail

marketing is stimulating, quick-paced, and influential. encompasses a wide range of activities including:
Environmental analysis Market research Consumer analysis Product planning etc.

It

THE CONCEPT OF RETAIL MARKETING

The retail marketing concept is the acceptance by the retailer that it is the customer and not demand that lie at the core of the retail organisation. The retail marketing concept is a philosophy, not a system of retailing or retail structure. It is founded on the belief that profitable retailing and satisfactory returns on investment can only be achieved by identifying, anticipating and satisfying customer needs and desires. It is an attitude of mind that places the customer at the very centre of retailing activities. 71

IMPORTANCE OF MARKETING IN RETAILING

Marketing is a vital tool for every retailer, as it identifies current, unfulfilled needs and wants, which it defines and quantifies. Marketing determines which target groups the retailer should serve. Marketing could be seen as delivering an acceptable standard of living. Marketing can ensure complete satisfaction and sustained customer loyalty. Marketing depends on the efficient co-ordination of consumer prediction, product development, packaging design and influencing demand through appropriate communication medium. From these, a suitable mix is achieved. 72

RETAIL MARKETING OBJECTIVES

The retail marketing objective is a performance parameter which has been explicitly stated. It can be stated in quantifiable terms and time terms so that results can be measured against it. Three types of retail objectives include: 1. Basic objective those which defines retailers long-term purposes. 2. Goals those which the retailer must achieve to be successful 3. Targets short-term goals that require immediate achievement. 73

RETAIL MARKETING MIX

Retail marketing mix is the term used to describe the various elements and methods required to formulate and execute retail marketing strategy. Retail managers must determine the optimum mix of retailing activities and co-ordinate the elements of the mix. The aim of such coordination is for each store to have a distinct retail image in consumers mind. The mix may vary greatly according to the type of market the retailer is in, and the type of product/services. 74.

RETAIL MARKETING MIX

While many elements may make up a firms retail marketing mix, the essential elements may include:
Store

location, merchandise assortments Store ambience, customer service, price, Communication with customers 10

MIX
Personal

selling Store image Store design Sales incentives People Process Physical evidence
11

THE MIX PLANNING

The retail marketing mix is the vehicle through which a retailers marketing strategy is implemented and, in planning the mix, retailers should be guided by three basic principles: 1. The mix must be consistent with the expectation of target customers; 2. Elements must be consistent with each other to create synergy; and 3. The mix must be responsive to competitive strategy. 77.

COMPOSITION OF KEY ELEMENTS

Place

Product
Price Promotion

People
Process Physical

Environment 13

KEY ELEMENT
Place (store location) Target market Channel structure Channel management Retailer image Retail logistics Retail distribution 14

KEY ELEMENT
Product (merchandise) Product development Product management Product features and benefits Branding Packaging After-sales services 15

KEY ELEMENT
Price Costs Profitability Value for money Competitiveness Incentives Quality Status

16

KEY ELEMENT
Promotion Developing promotional mixes Advertising management Sales promotion Sales management Public relations Direct marketing 17

KEY ELEMENT
People element Staff capability Efficiency Availability Effectiveness Customer interaction Internal marketing
18

KEY ELEMENT
Process element Order processing Database management Service delivery Queuing system Standardisation 19

RETAIL MARKETING PLANNING

Retail marketing plan consists of: Setting objectives Systematic way of identifying a range of options. Formulation of plans for achieving goals Logical sequence of retailing activities. 85

IMPORTANCE OF RETAIL MARKETING

PLANNING Hostile and complex retail marketing environment External and internal retail organisation factors interact

Maximising revenue Maximising profit Maximising return on investment Minimising costs

Each element has conflicting needs All these variables interact All these variables result in optimum compromise. 86.

MANAGERIAL USE
To

help identify sources of competitive advantage. To force an organised retail approach To develop specific areas of retail activities. To ensure consistent relationships between retail organisation and its proximate environment. To inform customers, suppliers and competitors. 87.

APPROACHES TO PLANNING
Top down approach Retail management sets goals and plans for all levels of management. Bottom up approach Various units prepare own goals and plans sent up for approval. 88.

TYPES OF PLANNING
Annual

plan short term and tactical.

Long

range three to five years relating to strategic retail management. plans five to ten years long term plans relating to the adaptation of the retailing approach. 89

Strategic

SHORT-TERM RETAIL PLANNING

Short-term Tactical planning relating to: Current retail marketing position Strategy for the year Objectives for the year Action , budgets and controls. Coordinating retail activities within departments. 25

LONG-TERM PLAN
Long-term Medium range planning relating to: Major factors and forces affecting the retailer. Long-term objectives. Resources required. Reviewed and updated regularly. Deals with current business 26

STRATEGIC RETAIL PLANNING

This

is the process of developing and maintaining a strategic fit between the retail organisations capabilities and its changing marketing opportunities. relies on developing a clear corporate mission, supporting objectives, creating a sound business portfolio, and coordinating functional strategies. 92.

It

CORPORATE LEVEL PLANNING

Retail

management should plan which business the retailer should stay in and which new areas to pursue. Design the retail organisation to withstand shocks. Adapt the organisation to take advantage of market opportunities. Define the corporate mission. 93.

MISSION STATEMENT
A

strategic plan should begin with a mission statement. A mission statement is a statement of the retail organizations purpose, what it wants to achieve in the large environment. It guides people in the retail organization so that they can work independently and yet collectively towards overall organizational goals. 94.

EXAM TYPE QUESTION

It is the effective blending of all the elements of retail marketing mix activities within the retail organization that determines the success of retail marketing management. Discuss this statement and explain with retail examples how the elements of retail marketing mix could be blended to ensure the success of retail operation. Mastering the process of trying to optimise the retail marketing mix still defies and frustrates most retail managers. Explain why personal guesswork and intuitions are used by retail managers most of the time. 30

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

AMOUNT OF SERVICE

Self-Service Retailers:

Serve customers who are willing to perform their own locatecompare-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.

PRODUCT LINE CLASSIFICATION

Specialty stores Department stores Supermarket Convenience stores Superstores Category killers

RELATIVE PRICES CLASSIFICATION

Discount stores Off-price retailers Factory outlet Independent off-price retailers Warehouse club

ORGANIZATIONAL CLASSIFICATION

Chain Stores Voluntary chain Retailer cooperative Franchise Merchandising conglomerates