Retailing - Markets and Institutions

8/3/2019 Retailing - Markets and Institutions

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RetailingRetailing::

Markets and InstitutionsMarkets and Institutions

Prof. Rushen ChahalProf. Rushen Chahal


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Retailing and RetailersRetailing and Retailersyy retailingretailing involves the sale of products and services to

end consumers for their personal nonbusiness use

y not all sales by retailers are retail sales

y most of the retailers of Canada are very small

y there is considerable concentration in retailing,accounted for by the large chains

y many small retailers join vertical marketing systems toincrease their competitiveness

y There were over 177,000 retail stores in Canada in1999, accounting for over $260 billion in sales

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Average Costs of Retailing andAverage Costs of Retailing and

WholesalingWholesaling

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100%

73%

65%

Retailers

selling price

and customers

cost.

Wholesalers

selling price

and retailers

cost.

Wholesalers

selling price

and retailers

cost.

Retailing Costs = 27%

Wholesaling Costs =

8% of 100, 11% of 73


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The Size of RetailersThe Size of Retailers

y Most retail establishments are very small, but there is ahigh degree of concentration.

A small number of establishments account for asubstantial share of retail trade.

y Small retailers typically succeed by:

Serving customers who seek benefits that small storescan provide better than large stores (such as betterservice).

Forming or joining a contractual vertical marketingsystem.

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ClassificationClassificationAccording toAccording to PhysicalPhysical

FacilitiesFacilities

y Location: population, traffic, shipping

access

y Design: interior/exterior appearance,y Layout: space allocated by product line,

merchandise displays, product location

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Nature ofNature of

Shopping CentresShopping Centres

yy Convenience centre:Convenience centre: 5 to 10 outlets withbasic amenities

yy Neighbourhood centre:Neighbourhood centre: 10 to 25 outlets,

with basics and key grocery or pharmacyyy Community centre:Community centre: 25 to 50 outlets with

all of above, and discount or departmentstore

yy Regional centre:Regional centre: 50 to 200 outlets, mallformat (indoors)

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Classification ofClassification of Retailers byRetailers by OwnershipOwnership

yy Corporate chainCorporate chaincentrally owned andmanaged stores that carry similar products.

yy IndependentIndependentsingle unaffiliated store.

yy Contractual vertical marketing systemContractual vertical marketing systemcontract specifies how members will operate:

Retailer cooperative

Voluntary chain

Franchising

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Retail ChainsRetail Chains

y corporate chains are centrally owned andmanaged which means that individual storeshave relatively little autonomy

y

chains can generally offer their customers lowerprices because of a lower cost structure

y they spread their risk and exposure over alarger number of stores; they can experiment

and gain economies of scale in advertisingy however, they tend to be quite standardized

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Classification by Marketing StrategyClassification by Marketing Strategy

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Copyright 2000 McGraw-Hill Ryerson Limited

Type of store Assortment Price level Customer service

Department store Broad, deep Avoid price

competition

Wide Array

Discount house Broad, shallow Low Few

Limited-line Narrow, deep Varies Varies

Specialty Very narrow,

deep

Avoid price

competition

Moderate to

extensive

Off-price Narrow, deep Low Few

Category killer Narrow, deep Low Few to moderate

Supermarket Broad, deep Varies Few

Convenience store Narrow, shallow High Few

Warehouse club Broad, shallow Very low Few


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Major Types of RetailersMajor Types of Retailers

yy department storesdepartment stores offer a wide variety ofmechandise and services and dont compete onthe basis of price; they are facing intense

competition and high operating costsyy discount housesdiscount houses are large-scale chain retailers

that offer a wide range of products but lessdepth; they offer low prices and fewer servicesand have succeeded in keeping costs lowthrough use of technology

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More RetailersMore Retailersyy limitedlimited--linelineyy specialtyspecialty

yy offoff--priceprice

yy category killercategory killer

yy supermarket retailingsupermarket retailing has extended with theopening of superstores and combination stores

yy convenience storesconvenience stores are now open 24 hours

yy warehouse clubwarehouse club chains have made a major entryinto Canada in recent years; they offer a widebreadth of products, but little depth

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Supermarket RetailingSupermarket Retailing

y Grocery retailer focusing on large size,self-service, competitive pricing andcentralized checkouts

y Delivers grocery and other consumer-oriented products

yy SuperstoreSuperstorelarger, more enhanced

yy Combination storesCombination storesenhancedsuperstores

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Nonstore RetailingNonstore Retailing

yy Nonstore retailingNonstore retailing:: Retailing activitieswhere transactions occur away from a retailstore.

y Nonstore sales equal about 15 percent ofretail trade.

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Methods ofNonstore RetailingMethods ofNonstore Retailing

yy Direct selling:Direct selling: Personal contact between asalesperson and a consumer away from aretail store.

DoorDoor--toto--door,door, using cold canvassing orfollow-up after other initial contact and

Party plan,Party plan, where host or hostess invitespeople to party with a sales presentation.

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More Methods ofNonStore RetailingMore Methods ofNonStore Retailing

yy Telemarketing:Telemarketing: Salesperson initiates contact with ashopper and also closes sale over telephone.

yy Direct marketingDirect marketing: Use of advertising to contactcustomers who, in turn, purchase products withoutvisiting a retail store.

x Direct mail

x Catalogue retailing

x Television shopping

x Internet shopping

yy Automatic vending:Automatic vending: Sale of products through amachine with no personal contact.

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Online RetailingOnline Retailing

y With telephone and cable companies investing billions ininteractive fibre-optic cable, online shopping of some kindis inevitable.

y Problems include: products are shown and sold one byone, and costs to develop a Web site can range to as highas $3 million.

y The systems have not yet been completely designed.

y In online comparison shopping, a consumer could ask a

discussion group about their experiences with aparticular product.

y Real success with online retailing is still many years away.

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Documents

Retailing - Markets and Institutions