15Retailing

Dr. Close

Role of Retailing

• Retailing: sale of products to final customers (personal or family use)

• Employs 15 million people in the U.S.• Accounts for $4 trillion to the U.S. economy

– Customer contact – vital customer data here– Wheel of retailing:

• Enter as low margin, low price (e.g., Izod)• Evolve higher price and service (supermarkets;

electronics)• Can you think of any other products or services

that evolved from shabby to sheek?

Retail Strategy

• Retailing is top heavy: top 5% have 53% of sales • Wal-Mart has 5% of all retail sales• Retailing is risky: ¾ fail within a year!• Non-financial risks: give up your evenings and weekends

(especially during holidays)– http://www.landsend.com

Lands End: Lands End:

Successful Aspects?Successful Aspects?

Franchising as a Retail Strategy

• Granting business rights to franchisee, who pays for the right to use the brand name, product, or methods

• Examples of retail franchisers:

Retail Marketing Mix

• Target Market (Old Navy, Gap, Banana Republic)

• Merchandise Mix (breadth or depth)

• Promotion (local, in-store works)

• Location, location, location

• Atmosphere (temperature, music, color)

• Price and payment options

Price and Retail Payment

How important are payment options?

Classification of Retail by

1. Ownership (indy, franchise chain)

2. Service level (Nordstrom vs. Wal-mart)

3. Assortment (CVS vs. Smith’s)

4. Price (Tiffany vs. jewelry kiosk)

Specialty Stores

• A type of retailer• Conventional: know examples of…

– Traditional: general store: anything sold in volume (why gone?)

– Focus develops:• Single line: one type (hardware, sporting goods,

and what else??)

Specialty Stores, cont.

• Category killers/specialists (modern form of single line)– Specialized mass; all in line (Toys R Us;

Circuit City; Home Depot)– “kill” type of merchandise

Department Stores

• Limited line: part of type; slow movers– Specialty shop: hi end, hi service, expanded

assortment– Department store: each department has a limited

line; decline since 50s; shopping products– High costs and competition

Discount Stores

• Scrambled merchandise: anything sells in volume (supermarkets, Rx)

• Mass merchandising concept:– Low price and turnover to

spur sales volume through bigger markets

Discount Stores, cont.

• Discount full-line mass merchandisers (Reg. Wal-Mart & K-Mart)– What? Large, self service stores focusing on

• Soft goods (housewares, fabrics, apparel) &• Staples (smooth demand, health and beauty)• Low price, low service, high turnover

Discount Stores, cont.

• Off-price retailers (Marshalls, Ross, TJ Maxx)• Supercenters (Super Wal-Mart, Super Target, Big K)

– All routine needs at low price– Mass merchandise + groceries

Supermarkets

– Large, self-service retailer with grocery specialty

– Self-scanning trend: what is your take?Self-scanning trend: what is your take?– Competition: fierce, 1% profit on many items

Warehouse Clubs

• Warehouse club / wholesale club (Sam’s, 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

Non-Store Retailing• Vending: hi costs; hi prices (flat sales)• Vending is a $40 billion U.S. market• Cashless vending=wave of future• Direct Marketing (Mail, Catalog, Telemarketing)• E-tailing (TV shopping, online)• M-commerce: buy from mobile devices

(e.g., cell phones)

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 serviceson ebay?)

eTail

• More innovative e-tail sites

• Mondera http://www.mondera.com

• Nike ID http://nikeid.nike.com

• Zappos http://www.zappos.com

E-cart abandonment

• When you put an item in your online cart, and do not complete the purchase during that Internet session.

• A common practice

Why do we do this?Why do we do this?

E-cart abandonment

• Top reasons for e-cart abandonment:Top reasons for e-cart abandonment:• Research/organization useResearch/organization use• Privacy/security issuesPrivacy/security issues• Frustration of the length of the checkout processFrustration of the length of the checkout process• Total cost (including shipping, handling, and/or Total cost (including shipping, handling, and/or

tax if applicable)tax if applicable)• Desire to wait for a sale price (online or offline)Desire to wait for a sale price (online or offline)• E-shopping for mere entertainment (versus a E-shopping for mere entertainment (versus a

true intention to buy)true intention to buy)

Summary

• Role of retailing

• Retail strategy

• Retail Marketing Mix

• Types of retailers

• Non-store retail

• E-tail

• Any questions??