PM304 Chapter 1

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CHAPTER ONE

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Retailing encompasses the business activitiesinvolved in selling goods and services toconsumers for their personal, family, or householduse. It includes every sale to the final consumer.

Consists of the final activities and steps neededto place merchandise made elsewhere into thehands of the consumers or to provide servicesto consumers

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Rank Company Main Emphasis

1 TESCO, GIANT,JUSCO.MYMYDIN

Full-line discount stores, supercenters, membership clubs

2 CELEBRITYFIRNESS

Membership clubs

3 WATSON,GURDIAN

Drugstores

4 IKEA Home centers

5 PARKSON,METROJAYA,ISETAN

Department stores, specialty stores

6 THE STORE,BILLIONS

Supermarkets

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Sell the variety of product forconsumer to purchase.

Divide large quantities intoconsumer-sized lots.Credit facilities

Service after salesProvide information.

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Physical facilities close toconsumers’ residences

Distribution the product onbehalf manufacturer andwholesaler

Risk takingStorage facilitiesInvolve in final process

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Fulfill the needs of customers and enhancethe living cost

Job opportunities

Decrease the unemployment rateBuilding relationship between manufacturer

and consumer

Expand to the global market (e-commerce)

Enhance the income of small retailer andSME’s.

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RETAIL INSTITUTION

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Food-OrientedConvenience

store

Conventionalsupermarket

Food-basedsuperstore

CombinationstoreBox (limited-line)

storeWarehouse store

General Merchandise

Specialty store

Traditionaldepartment

Full-line discountstore

Variety store

Off-price chain

Factory outlet

Membership club

Flea market

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Food oriented retailers

• well located neighborhood• open long hours and carries a moderate

number of items• small facilities• average to above average prices• average atmosphere and customers

service• ease of shopping at convenience stores

and impersonal nature of many largesupermarkets appealing to their customers• example like 7 eleven.

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Location:

Neighborhood

Merchandise:

Medium width

and low depth

of assortment;average quality

Prices:

Average to

Above average

Atmosphere and

Services:

Average

Promotion:

Moderate

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• A supermarket is a self-service food store with

grocery, meat, and produce departments• A conventional supermarket is a departmentalized

food store with a wide range of food and related

products; sales of general merchandise are limited.•The leading chains are Kroger, Safeway,

Albertson’s, and Ahold USA. Many independent

supermarkets are affiliated with cooperative or

voluntary organizations, such as IGA and Supervalu.• Example Cold Storage

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Location:

Neighborhood

Merchandise:

Extensive width and

depth of assortment;

average quality;manufacturer, private,

and generic brands

Prices:

Competitive

Atmosphere and

Services:

Average

Promotion:Heavy use of

newspapers, flyers,

and coupons

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• A food-based superstore is larger and more

diversified than a conventional supermarket

but usually smaller and less diversified thana combination store.•These stores are efficient, offer a degree of

one-stop shopping, stimulate impulse

purchases, and feature high-profit generalmerchandise.

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Location:

Community shopping

center or isolated site

Merchandise:

Full assortment plus

health and beauty aidsand general merchandise

Prices:

Competitive

Atmosphere and

Services:

Average

Promotion:

Heavy use of

newspapers, flyers

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• A combination store unites supermarket

and general merchandise in one facility•This leads to operating efficiencies and

cost savings.•Consumers like one-stop shopping and

will travel a longer distance to get there.•Impulse sales are high. Many general

merchandise items have better marginsthan food items.•Wal-Mart, Kmart, and Target operate

supercenters.

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Location:

Community shopping

center or isolated site

Merchandise:

Full assortment plus

health and beauty aidsand general merchandise

Prices:

Competitive

Atmosphere and

Services:

Average

Promotion:

Heavy use of

newspapers, flyers

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• A box (limited-line) store is a food-based

discounter that focuses on a small selection of

items, moderate hours of operation, few services,

and limited manufacturer brands.•They carry fewer than 2,000 items, few refrigerated

perishables, and limited assortments.•Prices are on shelves or overhead signs, items are

displayed in cut cases, customers bag items, andprivate-label brands are stressed. Prices are 20 to

30 percent below supermarkets.

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Location:Neighborhood

Merchandise:Low width and depth of

assortment; fewperishables; few national

brands

Prices:Very low

Atmosphere andServices:

Low

Promotion:Little or none

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• A warehouse store is a food-based discounter

offering a moderate number of food items in a no-

frills setting.

•These stores appeal to one-stop food shoppers,concentrate on special purchases of popular

brands, use cut-case displays, offer little service,

post prices on shelves, and locate in secondary

sites.•Many consumers do not like shopping in

warehouse settings. Also, the lack of brand

continuity may limit growth.

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Location:Secondary site, often in

industrial area

Merchandise:Moderate width and

low depth of

assortment; emphasis onmanufacturer brandsbought at discount

Prices:Very low


Low

Promotion:Little or none

General merchandise

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General merchandiseretailers

•specialty store concentrates on selling one goods or serviceline.• Specialty stores carry a narrow but deep assortment in their

chosen category and tailor the strategy to a given market

segment.

•This allows for a better product selection and sales expertisethan competitors.•Consumers shop at specialty stores because of

knowledgeable sales personnel, the variety of choices,

customer service policies, intimate store size and

atmosphere, the lack of crowds, and the absence of unrelatedmerchandise.•The stores can vary in retail strategy; there are upscale

stores for affluent customers and those with a discount

orientation for price-conscious consumers.

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•Leading specialty chains include Best Buy and

Circuit City (consumer electronics), Toys “R” Us

(toys), The Limited and Gap (apparel), and

Barnes & Noble and Borders (books).• A specialty store can be vulnerable to

seasonality or a decline in popularity for its

product category because its offering is so

concentrated.

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Location:Business district or

shopping center

Merchandise:Very narrow width and

extensive depth of assortment; average to

good quality

Prices:Competitive toAbove average


Average to excellent

Promotion:Heavy use of displaysExtensive sales force

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• A department store is a large retail unit with an

extensive assortment (width and depth) of goods

and services that is organized into separate

departments for purposes of buying, promotion,customer service, and control.•To be classified as a department store, a retailer

must sell a wide range of products (such as

apparel, furniture, and appliances and homefurnishings) and selected other items (such as

paint, hardware, toiletries, cosmetics, etc.)—with

no one merchandise line predominating.

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At a traditional department store, merchandisequality ranges from average to quite good, pricingis moderate to above average, and customerservice ranges from medium to high levels.

Traditional department stores were the first toadvertise prices, enact a one-price policy, developcomputerized checkouts, offer money-backguarantees, add branch stores, decentralizemanagement, and move into suburban shopping

centers.In recent years, industry wide sales growth of

traditional department stores has lagged behindthat of full-line discount stores.

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These are some reasons for the difficulties:

i. They no longer have brand exclusivity.

ii. Many firms have been too passive with private-label goods.

iii. There are more price conscious customers thanever.

iv. The popularity of shopping malls has aidedspecialty stores, as malls provide one-stopshopping.

v. Specialty stores have better assortments in thelines they carry.

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vi.Customer service has deteriorated.

vii.Some stores are too big and have toomuch unproductive selling space.

viii.Many department stores have a weakfocus on customer market segments and afuzzy image.

ix.Such chains as Sears have repeatedlychanged strategic orientation, which isconfusing to customers.

x. Some companies are not innovative

enough.

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To overcome these difficulties, traditionaldepartment stores need to clarify their niche;

emphasize customer service; present more exciting,

better-organized store interiors;

better utilize space;

open outlets in smaller, underdeveloped towns;

and centralize more buying and promotionfunctions, do better research, and reach customersmore efficiently.

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Location:Business district, shopping

center or isolated store

Merchandise:Extensive width and

depth of

assortment; average togood quality

Prices:Average to

Above average


Good to excellent

Promotion:Heavy ad and catalog

use; direct mail;personal selling

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• A full-line discount store is a type of department store with

these features:•a broad merchandise assortment for less than

conventional prices;

•greater emphasis on such items as auto accessories,•gardening equipment,•and housewares;•centralized checkout service and customer service;•a self-service emphasis;•private-brand nondurable goods and manufacturer-

brand durable goods;•less fashion-sensitive merchandise;•and inexpensive facilities and low operating costs.

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•The success of full-line discount stores is due to

a clear customer focus, popular brands,

competitive prices, improved image, and more

customer services.• A number of these stores are located in small

towns where competition is less intense.•The greatest challenges are competition fromother retailers, too rapid expansion, and

saturation of prime locations.

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depth of

assortment; average togood quality

Prices:Competitive

Atmosphere/Services:Slightly below

average to average

Promotion:Heavy on newspapers;price-oriented; selling

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• A variety store handles an assortment of

inexpensive and popularly priced goods and

services, such as apparel and accessories,

costume jewelry, notions and small wares,candy, toys, and other items in the price

range.•There are open displays, few salespeople,

incomplete merchandise lines, and nodelivery.

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Merchandise:Good width andsome depth of

assortment;below-average

to average quality

Prices:Average

Atmosphere/Services:Below average

Promotion:Use of newspapers

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• An off-price chain features brand name

(sometimes designer) apparel and accessories,

footwear (primarily women’s and family), linens,

fabrics, cosmetics, and/or housewares and sellsthem at everyday low prices in an efficient,

limited-service environment.

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poor depth of

assortment;average to good quality;

low continuity

Prices:Low

Atmosphere/Services:Below average

Promotion:Use of newspapers;

brands not advertised;limited selling

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• A factory outlet is a manufacturer-owned store sellingcloseouts, discontinued merchandise, irregulars, canceled

orders, and, sometimes, in-season, first-quality

merchandise.•Manufacturers’ interest in factory outlets has increased for

four basic reasons:•They can control where their discounted merchandise

is sold.•They are able to achieve supplemental profits.

•They can decide upon store visibility, set promotionpolicies, remove labels, and assure the proper disposal

of merchandise.•They may need revenue from outlet stores to sustain

their growth.

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Location:Out of the way site

or discount mall


poor depth of

assortment;low continuity

Prices:Very Low

Atmosphere/Services:Very low

Promotion:Little

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• A membership (warehouse) club appeals to

price-conscious consumers, who must be

members to shop there.

•Some members are small business ownersand employees who pay a membership fee to

buy merchandise at wholesale prices. They

account for 60 percent of total club sales.

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Location:Isolated store or

secondary site


poor depth of

assortment;low continuity

Prices:Very Low


Promotion:Little;

some direct mail

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• A flea market has many retail vendors

selling a range of products at discount

prices at sites not normally associatedwith retailing (such as racetracks,

stadiums, arenas, and former

supermarket and department store

locations).•They may be indoor or outdoor.

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Location:Isolated store


poor depth of

assortment;low continuity;variable quality

Prices:Very Low


Promotion:Limited

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RETAIL INSTITUTION

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It exceeds $375 billion annually 80% comes from direct marketing

Web-based retailing is fastestgrowing area

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Customer is first exposed to a goodor service through a nonpersonalmedium and then orders by mail,

phone, fax, or computerAnnual U.S. sales exceed $300 billionOther leading countries include

* Japan*

Germany* Great Britain*France*Italy

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Reduced costsLower pricesLarge geographic coverageConvenient to customersAbility to pinpoint customer segmentsAbility to eliminate sales tax for some

Ability to supplement regular businesswithout additional outlets

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Products cannot be examined prior topurchase

Costs may be underestimatedResponse rates to catalogs under 10%Clutter existsLong lead time required

Industry reputation sometimesnegative

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DIRECT SELLING

Direct selling includes both personalcontact with consumers in their homes

(and other nonstore locations) and phonesolicitations initiated by a retailer.

The direct selling strategy mix emphasizesconvenient shopping and a personal touch.

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Direct selling revenues in the United States haverisen relatively slowly. These are reasons why:

a. More women now work.

b. There is reduced interest in direct selling.

c. Market coverage is limited by the size of the

sales force.d. Sales productivity is low.

e. Sales force turnover is high.

f. Prices must be average to above average so that

a firm is able to compensate sales personnel.g. There are various legal restrictions.

h. There is a poor image associated with the term “door-to-door.”

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A vending machine is a cash- or card-operated retailing format that dispensesgoods and services. It eliminates the use

of sales personnel and allows 24-hoursales. Machines can be placed whereverthey are most convenient for consumers.

To improve productivity and customer

relations, vending machine operators areapplying several innovations.

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Collection, storage, and usage of relevant customer information* name*

address* background* shopping interests* purchase behavior

Observation of 80-20 rule

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Project a retail presence Enhance image Generate sales Reach geographically-dispersed

customers Provide information to customers

Promote new products Demonstrate new product benefits

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Provide customer service (e.g., e-mail)

Be more “personal” with consumers Conduct a retail business efficiently Obtain customer feedback Promote special offers

Describe employment opportunities Present information to potential

investors, franchisees, and the media

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1. Brochure Web Site

2. Commerce Web Site

3. Integrated Web Site

4. The ‘Webified’ Store

5. Site Integrated withManufacturer Systems

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Using theWeb

informationentertainment

interactivecommunications

ShoppingOnline

selectionpricesconveniencefun

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Trust Fear

Lack of security Lack of personal communication

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Develop or exploit a well-known,trustworthy retailer name

Tailor the product assortment for Webshoppers

Enable the shopper to click as little aspossible

Provide a solid search engineUse customer information

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Nontraditional retailing also includesformats that do not fit into the store andnon store-based categories: Video kiosks Airport retailing

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The video kiosk is a freestanding,interactive, electronic computer terminalthat displays products and related

information on a video screen; it often hasa touch screen for consumers to makeselections.

Video kiosks can be placed almost

anywhere, require few employees, and arean entertaining and easy way to shop.

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These are some of the distinctive featuresof airport retailing:

There is a large group of prospective

shoppers.Air travelers are a temporary captive

audience at the airport.

Sales per square foot of retail space aremuch higher than at regional malls. Rentis about 20 to 30 percent higher persquare foot.

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Airport stores are smaller, carry fewer items, andhave higher prices than traditional stores.

Replenishing merchandise and stocking shelvesmay be difficult at airport stores because they arephysically removed from delivery areas and spaceis limited.

The sales of gift items and forgotten travel itemsare excellent.

Passengers are at airports at all times of day solonger store hours are possible.

International travelers are often interested induty-free shopping.

There is much tighter security at airports thanbefore, which has had a dampening effect onsome shopping.

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ProductPricing

PlacePromotion

Personalities

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Target market is that segment of the market that the retailerdecides to pursue through itsmarketing efforts.

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Three criteria :Measurable market segmentdemographic

Accessibility or the degree to whichthe retailer can target itspromotional or distribution efforts

to a particular market segment.Substantial or large enough to beprofitable for the retailer.

Documents

PM304 Chapter 1