Ch.

14 Retailing
1. Importance of Retailing
a. Retailing: all the activities directly related to the sale of goods and services to the ultimate
consumer for personal, nonbusiness use
b. Retailer: a channel intermediary that sells mainly to consumers
c. Trends and innovations related to customer data, social media, and alternative forms of
shopping are constantly developing and forcing retailers to react
2. Different Types of Retailers
a. Ways retailers are classified:
b. Type of Ownership:
i. independent retailer: a retailer owned by a single person or partnership and not
operated as part of a larger retail institution
ii. chain store: a store that is part of a group of the same stores owned and operated
by a single organization
iii. franchise: a relationship in which the business rights to operate and sell a product
are granted by the franchisor to the franchisee
1. franchisor: the originator of a trade name, product, methods of operation,
and the like that grants operating rights to another party to sell its product
2. franchisee: an individual or business that is granted the right to sell another
party’s product
c. Level of Service:
i. Ranges from full service to self-sevice
d. Product Assortment:
i. Width: refers to the assortment of products offered
ii. Depth: number of different brands offered in each assortment
iii. Stores modify their product assortment to accommodate factors in the external
environment
iv. Type of product can influence customer expectations about product assortments
e. Price:
i. gross margin: the amount of money the retailer makes as a percentage of sales after
the cost of goods sold is subtracted
ii. some retailers/online stores have invested in electronic tagging systems for dynamic
pricing
iii. customers have more information now to compare dozens of sellers’ prices at the
same time
f. Types of instore Retailers:
g. department store: a store housing several departments under one roof
h. specialty store: a retail store specializing in a given type of merchandise
i. supermarket: a large, departmentalized, self-service retailer that specializes in food and
some nonfood items
j. drugstore: a retail store that stocks pharmacy-related products and services as its main
draw
 k. convenience store: a miniature supermarket, carrying only a limited line of high-turnover
convenience goods
l. discount store: a retailer that competes on the basis of low prices, high turnover, and high
volume
i. full-line discount store: a discount store that carries a vast depth and breadth of
product within a single product category
ii. supercenter: a large retailer that stocks and sells a wide variety of merchandise
including groceries, clothing, household goods, and other general merchandise
iii. Single line specialty discount store: a retail store that offers a nearly complete
selection of single-line merchandise and uses self-service, discount prices, high
volume, and high turnover
1. category killer: a large discount store that specializes in a single line of
merchandise and becomes the dominant retailer in its category
a. Won with lower costs
iv. warehouse club: a large, no-frills retailer that sells bulk quantities of merchandise to
customers at volume discount prices in exchange for a periodic membership fee
v. off-price retailer: a retailer that sells at prices 25 percent or more below traditional
department store prices because it pays cash for its stock and usually doesn’t ask for
return privileges
1. factory outlet: an off-price retailer that is owned and operated by a
manufacturer
2. used goods retailer: a retailer whereby items purchased from one of the
other types of retailers are resold to different customers
vi. restaurant: a retailer that provides both tangible products—food and drink—and
valuable services—food preparation and presentation
3. Rise of Nonstore retailing
a. nonstore retailing: shopping without visiting a store
i. changes in culture and society have lead to rise in nonstore retailing quicker than in-
store retailing
ii. traditional brick-and-mortar stores have tried seeking a presence in limited
nonstore formats
b. automatic vending: the use of machines to offer goods for sale
i. self-service technologies (SST): technological interfaces that allow customers to
provide themselves with products and/or services without the intervention of a
service employee ex. ATMs, self-service gas pumps
c. direct retailing: the selling of products by representatives who work door-to-door, office-to-
office, or at home sales parties
d. direct marketing (DM): techniques used to get consumers to make a purchase from their
home, office, or other nonretail setting
i. telemarketing: the use of the telephone to sell directly to consumers
ii. direct mail: the delivery of advertising or marketing material to recipients of postal
or electronic mail
iii. microtargeting: the use of direct marketing techniques that employ highly detailed
data analytics in order to isolate potential customers with great precision
 iv. shop-at-home television network: a specialized form of direct response marketing
whereby television shows display merchandise, with the retail price, to home
viewers
e. online retailing (e-tailing): a type of shopping available to consumers with personal
computers and access to the Internet
i. also using social media to buy things
4. Retail Operations Models
a. Off-Price retailers: deemphasize customer service and product selection in favor of low
prices. This is achieved through a greater focus on lean inventory management
b. Specialty Shops: adopt a high-service approach supported by an agile approach to inventory.
Have more stock and option to meet customer demands but at higher prices
c. floor stock: inventory displayed for sale to customers
d. back stock: inventory held in reserve for potential future sale in a retailer’s storeroom or
stockroom
5. Executing a retail marketing strategy
a. Managers develop strategy based on goals established by stakeholders and overall strategic
plans developed by company leadership
b. Goals typically focus on:
i. Increasing total sales
ii. Reducing COGS
iii. Improving financial ratios
c. Store level retailing goals:
i. Increased store traffic
ii. Higher sales of a specific item
iii. Developing a more upscale image
iv. Creating heightened public awareness of the store or its product/services
d. Defining a target market
i. First and foremost task of developing a retail strategy
ii. Begins with market segmentation
e. retailing mix: a combination of the six Ps—product, promotion, place, price, presentation,
and personnel—to sell goods and services to the ultimate consumer
i. Projects a store’s image and influences the customers’ perceptions
ii. Using these impressions, shoppers position stores against each other
iii. Product
iv. Promotion
1. Brand Cannibalization: the reduction of sales for one brand as the result of
the introduction of a new product or promotion of a current product by
another brand
a. the retailer incurs significant expense in executing the promotion
itself
b. the promotion creates inaccurate sales forecasts for both the
promoted and cannibalized products, leading to stockouts of the
promoted brand and financial losses from discounting surplus
inventory of the cannibalized brand
 v. Place
1. destination store: a store that consumers purposely plan to visit prior to
shopping
2. Freestanding
3. Strip centers
4. Community shopping centers
5. Regional malls
6. Lifestyle centers
vi. Price
vii. Presentation
1. Helps determine store image and positions the retailer in the customers
mind
2. Atmosphere: atmosphere the overall impression conveyed by a store’s
physical layout, décor, and surroundings
a. Employee type and density
b. Merchandise type and density
c. Fixture type and density
d. Sound
e. Odors
f. Visual factors
3. Layout: atmosphere the overall impression conveyed by a store’s physical
layout, décor, and surroundings
4. market-basket analysis: sift through the data collected by their point-of-
purchase scanning equipment. The analysis looks for products that are
commonly purchased together to help retailers find ideal locations for each
product
viii. Personnel
1. Trading up: means persuading customers to buy a higher-priced item than
they originally intended to purchase
2. Suggestion selling: a common practice among most retailers, seeks to
broaden customers’ original purchases with related items
6. Retailing Decisions for Services
a. the same skills, techniques, and strategies used to manage inventory can also be used to
manage service inventory, ex. Hospital beds, bank accounts, airplane seats
b. Service Distribution Focus Areas
i. Minimizing wait times
ii. Managing service capacity
iii. Improving service delivery
iv. Establishing channel wide network coherence
7. Addressing Retail Product/Service Failures
a. Some customers are disappointed by design, everyone can be reached by your decision of
targeting, segmentation and retailing mix
b. The best retailers have plans in place to recover from inevitable lapses in service and even
benefit from them
 c. Actions to take:
i. Notify customers in advance of stockouts and explain why certain products aren’t
available
ii. Implementing liberal return policies
iii. Issuing product recalls in conjunction with promotional offers that provide future
incentives to repurchase
d. the best retailers treat customer disappointments as opportunities to interact with and
improve relations with their customer
8. Retail Trends and Advancements
a. big data analytics: the process of discovering patterns in large data sets for the purposes of
extracting knowledge and understanding human behavior
b. beacon: a device that sends out connecting signals to customers’ smartphones and tablets
in order to bring them into a retail store or improve their shopping experience
c. shopper marketing: understanding how one’s target consumers behave as shoppers, in
different channels and formats, and leveraging this intelligence to generate sales or other
positive outcomes
i. shopper analytics: searching for and discovering meaningful patterns in shopper
data for the purpose of fine-tuning, developing, or changing market offerings
ii. Implications of shopper marketing for businesses:
1. Strategic alignment of customer segments
2. Quicker reactions for retailers’ supply chain
d. retail channel omnification: the reduction of multiple retail channel systems into a single,
unified system for the purpose of creating efficiencies or saving costs
e. click-and-collect: the practice of buying something online and then traveling to a physical
store location to take delivery of the merchandise