Retailing includes all the activities involved in selling goods or services directly to final customers for their personal, nonbusiness use. A retailer is any business enterprise whose sales volume comes primarily from retailing.
Types of Retailing
Store Retailing: 8 categories
- Specialty Stores: Carry a narrow product line with a deep assortment within the line. Ex: Athlete’s Foot, Tall Men, The Limited.
- Department Stores: Carry several product lines. Ex: Sears, J.C. Penney, Bloomingdale’s.
- Supermarkets: Relatively large, low-cost, low-margin, high-volume, self-service operations designed to serve the consumer’s total needs for food, laundry, & household maintenance products. Ex: Kroger, Safeway, Food Lion.
- Convenience Stores: Relatively small stores located near residential areas, opened long hours seven days a week. Ex: 7-eleven
- Discount Stores: Sell standard merchandise at lower prices by accepting lower margins & selling higher volumes. Ex: Wal-Mart, H.E.B., Kmart.
- Off-Price Retailers: Buy at less than regular wholesale prices & charge consumers less than retail.
- Factory outlets: Owned & operated by manufacturers & normally carry the manufacturer’s surplus, discontinued or irregular goods. Ex: Ralph Lauren, Liz Claiborne.
- Independent off-price retailers: Owned & run either by entrepreneurs or by division of larger retail corporations. Ex: TJX Cos.
- Warehouse clubs: Sell a limited number of brand-name grocery items, appliances, clothing, etc. at deep discounts. Operate in huge, low-overhead, warehouse-like facilities. No credit cards. No deliveries. Ex: Sam’s Club.
- Superstores: 35,000 square feet selling space. Meets consumer’s total needs. Ex: Petsmart, Home Depot, Staples.
- Catalog Showrooms: Sell a broad selection of high-markup, fast-moving, brand-name goods at discount. Ex: Service Merchandise.
Retail life cycle: emerges, grows, matures, declines.
New store types emerge to challenge old store types.
New store types emerge to meet widely different consumer preferences for service levels & specific services. Retailers can position themselves as offering one of four levels of service:
- Self-selection. Customers can ask for assistance. Higher operating expenses than the previous one.
- Limited-service. More sales assistance because customers need more info.
- Full-service. Provides salespeople who are ready to assist in every phase of the locate-compare-select process.
Nonstore Retailing: 4 major categories
- Direct Selling: Oldest one. 3 types:
- One-to-one selling: A salesperson visits & tries to sell products to a single potential user. Ex: Avon, Electrolux.
- One-to-many: A salesperson goes to the house of a host who has some people in the house. Ex: Tupperware.
- Multilevel: A variant of direct selling in which companies recruit independent businesspeople who act as distributors for their products. These distributors in turn recruit & sell to sub-distributors, who eventually recruit others to sell their products, usually in customer homes. Ex: Amway, NuSkin.
Achieve many economies of scale, such as greater purchasing power, wider brand recognition, & better trained employees. The major types of retail organizations are:
- Corporate Chain Stores: Two or more outlets that are commonly owned & controlled, employ central buying & merchandising, & sell similar lines of merchandise. Their size allows them to buy in large quantities. Ex: Tower Records, Pottery Barn.
- Voluntary Chain: Wholesaler-sponsored group of independent retailers engaged in bulk buying & common merchandising. Ex: Independent Grocers Alliance.
- Retailer Cooperative: Independent retailers who set up a central buying organization & conduct joint promotion efforts. Ex: Associated Grocers, ACE.
- Consumer Cooperative: A retail firm owned by its customers. Started by community residents. Ex: local consumer cooperatives.
- Franchise Organization: Contractual association between a franchiser & franchisees. Normally based on some unique product, service or method of doing business. Prominent in fast foods, video stores, health/fitness centers, auto rentals. Ex: McDonald’s, Pizza Hut, Taco Bell, Burger King.
- Merchandising Conglomerate: A free-form corporation that combines several diversified retailing lines & forms under central ownership , along with some integration of their distribution-&-management function Ex: F.W. Woolworth, Kids Mart.
Retailer Marketing Decisions
- Target-market decision: A retailer’s most important decision. Until the target is not defined, the retailer cannot make consistent decisions. Retailers should conduct periodic marketing research to ensure that they are reaching & satisfying their target customers.
- Product Assortment-&-procurement decision: Must match the target market’s shopping expectations. The retailer has to decide on product-assortment breadth & depth. Another product assortment dimension is the quality of the goods. The real challenge is to develop a product differentiation strategy:
- Feature some exclusive brands not available at competing retailers.
- Feature mostly private branded merchandise.
- Feature blockbuster distinctive merchandise events.
- Feature surprise or ever-changing merchandise
- Feature the latest or newest merchandise first.
- Offer merchandise customizing services.
- Offer a highly targeted assortment
Once the retailer decides on the product-assortment strategy, the retailer must decide on procurement sources, policies, & practices. Retailers are rapidly improving their procurement skills. Stores are learning to measure direct product profitability, which enables them to measure a product’s handling costs from the time it reaches their warehouse until a customer buys it & takes it out.
- Central business districts (downtown). Rents are high.
- Regional shopping centers. Large suburban malls containing 40-200 stores. Malls are attractive because of generous parking, one-stop shopping, restaurants, & recreational facilities.
- Community shopping centers. Smaller malls. Between 20-40 smaller stores.
- Strip malls. Contain a cluster of stores, usually housed in one long building.
- A location within a larger store. Certain well known retailers-McDonald’s, Dunkin Donuts- are locating units in airports, schools, Wal-Marts.
Retailers can assess a particular store’s sales effectiveness by looking at four indicators:
- Number of people passing by on an average day.
- % who enter the store.
- % of those entering who buy.
- Average amount spent per sale.
Trends in Retailing
Main developments that retailers need to take into account as they plan their competitive advantage:
- New Retail Forms constantly emerge to threaten established retail forms.
- Shortening Retail Life Cycles. Retail forms are rapidly copied.
- Nonstore Retailing due to electronic age.
- Increasing Intertype Competition. Competition between store & nonstore retailers is common.
- Polarity of Retailing.
- Giant Retailers are emerging.
- Changing Definition of One-Stop Shopping. Now specialty stores within malls are becoming increasingly competitive with large department stores in offering one-stop shopping.
- Growth of Vertical Marketing Systems.
- Portfolio Approach. Retail organizations are increasingly designing & launching new store formats targeted to different lifestyle groups.
- Growing Importance of Retail Technology.
- Global Expansion of Major Retailers due to mature & saturated markets at home. Ex: The Gap, Burger King, Tony Romas.
- Retail Stores as Community Centers or Hangouts. Establishments that provide a place for people to congregate (cafes, tea shops, book-shops, etc.).
All the activities involved in selling goods or services to those who buy for resale or business use.
- Excludes manufacturers, farmers & retailers.
- They are also called distributors.
- Pay less attention to promotion, atmosphere & location.
- Transactions are larger than in retailing.
- They are used whenever they perform one of the following more efficiently: selling & promoting, buying & assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, market info & management services & counseling.
Types of Wholesalers
- Merchant wholesalers. Independently owned businesses that take title to the merchandise they handle. Two categories:
- Full service wholesalers provide a full line of services. Two types:
- wholesale sell primarily to retailers
- industrial distributors sell to manufacturers.
- Limited-service wholesalers offer fewer services than full-service wholesalers. Several types:
- Cash & carry wholesalers. Limited line of fast moving goods. Sell to small retailers. Do not deliver.
- Truck wholesalers. Limited line of semi-perishable products. Sell & deliver.
- Drop shippers. Operate in bulk industries. Do not carry inventory.
- Rack jobbers. Serve grocery & drug retailers. Bill the retailers only for the goods sold to consumers.
- Producers’ cooperatives. Owned by farmer members & assemble farm produce to sell in local markets.
- Mail-order wholesalers. Send catalogs.
- Brokers bring buyers & sellers together & assist in negotiation.
- Agents represent either buyers or sellers on a more permanent basis than brokers do. Several types:
- Manufacturers’ agents
- Selling agents
- Purchasing agents
- Commission merchants
Involves planning, implementing & controlling the physical flows of materials & final goods from points of origin to points of use to meet customer requirements at a profit. Info systems plays a critical role in managing market logistics.
Involves several activities: sales forecasting, distribution, production & inventory levels.
Order processing: How should orders be handled?
Warehousing: Where should stocks be located?
Inventory: How much stock should be held?
Transportation: How should goods be shipped?