Retailing Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 16 Part Four Distribution Decisions

Retailing

Copyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

1616

Part FourPart FourDistribution Distribution DecisionsDecisions

Copyright © Houghton Mifflin Company. All rights reserved. 16–2

Chapter Learning Objectives

• To understand the purpose and function of retailers in the marketing channel

• To identify the major types of retailers• To recognize the various forms of nonstore

selling• To examine major types of franchising and its

benefits and weaknesses• To explore strategic issues in retailing


Chapter Outline

• The Nature of Retailing• Major Types of Retail Stores• Nonstore Retailing• Franchising• Strategic Issues in Retailing


The Nature of Retailing

• Retailing–Transactions in which ultimate consumers are the

buyers

• Retailers–Organizations that purchase products for the purpose

of reselling them to ultimate consumers• Retailers add value—shopping convenience, services, and

purchasing assistance to customers• Retailers create utility—time, place, possession, and form

–Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation.



Major Types of Retail Stores

• General-Merchandise Retailers–A retail establishment that offers a variety of product

lines–Department stores

• Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management

–Discount stores• Self-service, general merchandise stores offering brand

name and private brand products at low prices

–Supermarkets• Large, self-service stores that carry a complete line of food

products, along with some nonfood products


Major Types of Retail Stores (cont’d)

• General-Merchandise Retailers (cont’d)–Superstores

• Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products

–Hypermarkets• Stores that combine supermarket and discount shopping

in one location

–Warehouse clubs• Large-scale, members-only establishments that combine

features of cash-and-carry wholesaling with discount retailing



• General-Merchandise Retailers (cont’d)–Warehouse showrooms

• Retail facilities in large. low-cost buildings with large on-premise inventories and minimal services

–Catalog showrooms• A form of warehouse showroom where consumers can

shop from a catalog and products are stored out of buyers’ reach



• Specialty Retailers–Traditional specialty retailers

• Also called “limited-line” and “single-line” retailers• Carry a narrow product mix with deep product lines (e.g.,

pet supplies)• Have higher costs and higher margins• Provide more product selection (first-line brands), product

expertise, and high levels of personal service



• Specialty Retailers (cont’d)–Off-price retailers

• Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts

• Charge less than do department stores for comparable merchandise and offer few customer services

• Have established long-term relationships with suppliers for continuing supplies of reduced-price goods

–Category killers• Concentrate on a major product category and compete on

the basis of low prices and product availability


NonStore Retailing

• Nonstore Retailing–The selling of products outside the confines of a retail

facility–Growth sector of retailing due to

• Consumers are less willing to devote personal time to shopping in retail stores.

• Poorly trained and informed retail personnel can’t offer needed sales assistance.

• Growing population of older shoppers who tend to shop less in large stores.


NonStore Retailing (cont’d)

• Direct Selling–The marketing of products to ultimate consumers

through face-to-face sales presentations at home or in the workplace

• Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products

–Benefits• Personal attention to customer• Convenience of time and place of presentation

–Limitations• High costs make it the most expensive form of selling• Negative consumer view of direct selling


NonStore Retailing (cont’d)

• Direct Marketing–The use of telephone and nonpersonal media to

introduce products to consumers, who then can purchase them via mail, telephone, or the Internet


Direct Marketing

• Catalog Marketing–A type of marketing in which an organization provides a

catalog from which customers can make selections and place orders by mail, telephone, or the Internet

• Consumer advantages are efficiency and convenience• Marketer advantages are lower location, facility, selling,

and operating costs.• Disadvantages are inflexibility

and limited selection and local service availability.


Direct Marketing (cont’d)

• Direct-Response Marketing–A type of marketing that occurs when a retailer

advertises a product and makes it available through mail or telephone orders

• Telemarketing–The performance of marketing-related activities by

telephone


Direct Marketing (cont’d)

• Television Home Shopping–A form of selling in which products are presented to

television viewers, who can buy them by calling a toll-free number and paying with a credit card

• Online Retailing–Retailing that makes products

available to buyers through computer connections

• Automatic Vending–The use of machines to dispense

products


Franchising

• Franchising–An arrangement in which a supplier (franchiser) grants

a dealer (franchisee) the right to sell products in exchange for some type of consideration

• Franchiser furnishes equipment, buildings, management know-how, and marketing assistance.

• Franchisee supplies labor and capital, and operates the business by the provisions of the franchise agreement.



Major Types of Retail Franchises

• Manufacturer Authorization–Product producer licenses retailers to sell its brand

name product(s)

• Distributor Authorization–Product producer licenses distributors to sell its brand

name product to retailers

• Producer Authorization–Franchiser supplies brand names, production

techniques, or other services to franchisee while maintaining development and control of marketing strategies


Franchising (cont’d)

• Advantages–Enables business startup with limited capital–Provides developed and proven business to franchisee–Attracts customers with established brand name–Allows immediate market entry–Motivates franchisee to succeed

• Disadvantages–Control over aspects of the business and its operations

by franchiser–Expense of continuing franchise royalties and

advertising fees–Lack of control of franchisees by franchisor


Strategic Issues in Retailing

• Retail Store Location–Factors affecting location

• Intended target market• Kinds of products• Suitability site for customer access• Characteristics of existing retail operations

• Types of Locations–Free-standing structures

• Position relative to competition• Customer access and parking

–Traditional business districts• Redevelopment of decaying

downtown infrastructure


Strategic Issues in Retailing (cont’d)

• Traditional Shopping Centers–Neighborhood shopping centers

• Usually consist of several small convenience and specialty stores.

–Community shopping centers• Include one or more department stores (anchors), some

specialty stores, and convenience stores.

–Regional shopping centers• Have the largest department

stores, the widest product mix, and the deepest product lines of all shopping centers.



• Nontraditional Shopping Centers–Factory outlet malls

• Shopping centers that feature discount and factory outlet stores carrying traditional brand name products

–Miniwarehouse mall• Loosely planned centers that lease space to retailers

running retail stores out of warehouse bays

–Nonanchored malls• Do not have traditional department store anchors; instead

combine off-price and category killer stores in a “power center” format



• Retail Positioning–Identifying an unserved or underserved market

segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment

• Store Image–Atmospherics

• The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying

• Interior layout, colors, furnishings, and lighting• Exterior storefront and entrance design, display windows,

and traffic congestion



• Scrambled Merchandising–The addition of unrelated products and product lines to

an existing product mix, particularly fast-moving items that can be sold in volume

–Intent of scrambled merchandising• Convert stores into one-stop shopping centers• Generate more customer traffic• Realize higher profit margins• Increase impulse purchases



• The Wheel of Retailing–A hypothesis holding that new retailers usually enter

the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.

Maybry’s

Maybry’s

at the Mall

at the Mall


The Wheel of Retailing

FIGURE 16.1Source: Adapted from Robert F. Hartley, Retailing: Challenge and Opportunity, 3rd ed., p. 42. Copyright © 1984 by Houghton Mifflin Company. Used by permission.


After reviewing this chapter you should:

• Understand the purpose and function of retailers in the marketing channel

• Be able to identify the major types of retailers• Recognize the various forms of nonstore retailing• Have examined the major types of franchising

and franchising’s strengths and weaknesses• Have explored the strategic issues in retailing

Chapter 16 Chapter 16 Supplemental SlidesSupplemental Slides



Key Terms and Concepts

• The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion.

• To rearrange the slide order or alter the content of the presentation–select “Slide Sorter” under View on the main menu.–left click on an individual slide to select it; hold and drag

the slide to a new position in the slide show.–To delete an individual slide, click on the slide to select,

and press the Delete key.–Select “Normal” under View on the main menu to return

to normal view.


Important Terms

• Retailing–Transactions in which ultimate consumers are the

buyers

• Retailers–Organizations that purchase products for the purpose

of reselling them to ultimate consumers

• General-Merchandise Retailers–A retail establishment that offers a variety of product

lines that are stocked in depth


Important Terms

• Department stores–Large retail organizations characterized by wide

product mixes and organized into separate departments to facilitate marketing efforts and internal management

• Discount Stores–Self-service, general merchandise stores offering brand

name and private brand products at low prices

• Supermarkets–Large, self-service stores that carry a complete line of

food products, along with some nonfood products


Important Terms

• Superstores–Giant retail outlets that carry food and nonfood products

found in supermarkets, as well as most routinely purchased consumer products

• Hypermarkets–Stores that combine supermarket and discount

shopping in one location

• Warehouse Clubs–Large-scale, members-only establishments that

combine features of cash-and-carry wholesaling with discount retailing


Important Terms

• Warehouse Showrooms–Retail facilities in large. low-cost buildings with large on-

premise inventories and minimal services

• Catalog Showrooms–A form of warehouse showroom where consumers can

shop from a catalog and products are stored out of buyers’ reach

• Traditional Specialty Retailers–Carry a narrow product mix with deep product lines


Important Terms

• Off-Price Retailers–Buy manufacturers’ seconds, overruns, returns, and off-

season merchandise for resale to consumers at deep discounts

• Category Killers–Concentrate on a major product category and compete

on the basis of low prices and product availability

• Nonstore Retailing–The selling of products outside the confines of a retail

facility


Important Terms

• Direct Selling–The marketing of products to ultimate consumers

through face-to-face sales presentations at home or in the workplace

• Direct Marketing–The use of telephone and nonpersonal media to

introduce products to consumers, who then can purchase them via mail, telephone, or the Internet

• Catalog Marketing–A type of marketing in which an organization provides a

catalog from which customers can make selections and place orders by mail, telephone, or the Internet


Important Terms

• Direct-Response Marketing–A type of marketing that occurs when a retailer

advertises a product and makes it available through mail or telephone orders

• Telemarketing–The performance of marketing-related activities by

telephone

• Television Home Shopping–A form of selling in which products are presented to

television viewers, who can buy them by calling a toll-free number and paying with a credit card


Important Terms

• Online Retailing–Retailing that makes products

available to buyers through computer connections

• Automatic Vending–The use of machines to dispense products

• Franchising–An arrangement in which a supplier (franchiser) grants

a dealer (franchisee) the right to sell products in exchange for some type of consideration


Important Terms

• Manufacturer Authorization–Product producer licenses retailers to sell its brand

name product(s)

• Distributor Authorization–Product producer licenses distributors to sell its brand

name product to retailers

• Producer Authorization–Franchiser supplies brand names, production

techniques, or other services to franchisee while maintaining development and control of marketing strategies


Important Terms

• Neighborhood Shopping Centers–Usually consist of several small convenience and

specialty stores.

• Community Shopping Centers–Include one or more department stores (anchors),

some specialty stores, and convenience stores.

• Regional Shopping Centers• Have the largest department stores, the widest product

mix, and the deepest product lines of all shopping centers.


Important Terms

• Factory outlet malls–Shopping centers that feature discount and factory

outlet stores carrying traditional brand name products

• Miniwarehouse mall–Loosely planned centers that lease space to retailers

running retail stores out of warehouse bays

• Nonanchored malls–Do not have traditional department store anchors;

instead combine off-price and category killer stores in a “power center” format


Important Terms

• Retail Positioning–Identifying an unserved or underserved market

segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment

• Atmospherics–The physical elements in a store’s design that appeal to

consumers’ emotions and encourage buying

• Scrambled Merchandising–The addition of unrelated products and product lines to

an existing product mix, particularly fast-moving items that can be sold in volume


Important Terms

• The Wheel of Retailing–A hypothesis holding that new retailers usually enter

the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.


Transparency Figure 16C

General Merchandise RetailersType of Retailer Examples

Department store Foleys,

Lord &Taylor, Sears

Discount store Wal-Mart, Kmart,

Target

Supermarket Food Lion, A&P,

Ralph’s, Safeway,

Krogers

Superstore Wal-Mart

Supercenter

Hypermarket Carrefour’s

Warehouse club SAM’s, Price-Costco

Warehouse showroom lkea Furniture

Catalog showroom ServiceMerchandise


Transparency Figure 16E

Examples of Category Killers

• Toys “R” Us

• Home Depot

• Best Buy

• Office Depot

• PETsMart

• Barnes & Noble

Can you think of others?


Transparency Figure 16G

Customers’ Reactions to Telemarketing Calls

Source: “Do Not Disturb,” American Demographics, May 2001, p. 28. Adapted with permission.

How can telemarketers be more effective in reaching customers?


Transparency Table 16H

Percentage of Online Shoppers Who Have Experienced Problems Sometimes or Frequently

Source: “Houston, We Have A Problem,” American Demographics, The Marketing Tools Directory, 2002, p. D60. Adapted with permission.

Documents

Retailing Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 16 Part Four Distribution Decisions