CHAPTER 16Retailing:

Bricks and Clicks

M A R K E T I N GReal People, Real Choices

Fourth Edition

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Chapter Objectives• Define retailing and understand how retailing

evolves• Describe how retailers are classified• Describe the more common forms of nonstore

retailing• Describe the B2C e-commerce, its benefits,

limitations, and future promise• Understand the importance of store image to a

retail positioning strategy and explain how a retailer can create an image in the marketplace

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Retailing

• Final stop on the distribution path• The process by which products are sold

to consumers for personal use• Retailers add value with image,

inventory, service quality, location, and pricing policies

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The Wheel of Retailing

• New types of retailers find it easiest to enter the market by offering goods at lower prices than competitors; after they gain a foothold, they gradually trade up, improving facilities and increasing the quality and assortment of merchandise, and offering special amenities; upscaling increases costs causing prices to rise; higher prices open the door for a new entrant charging lower prices

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Retail Life Cycle

• Retailers are also products because they provide benefits and must offer a competitive advantage to survive– Introduction: new retailer takes a unique approach to

doing business– Growth: retailer catches on with shoppers, sales and

profits rise, others start to copy it so retailer expands offerings

– Maturity: many have copied it and an entire industry has formed, profits decline

– Decline: retail format becomes obsolete

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What’s in Store for the Future

• Demographics• Technology• Globalization

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Major Demographic Factors

• Convenience for consumers• Catering to specific age segments• Recognizing ethnic diversity

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Classifying Retailers

• All retailers are classified by the NAICS codes

• Some lines still blurred– scrambled merchandising – strategy

of carrying a combination of food and nonfood items

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Classifying Retailers by Service

• Self-service retailers• Full-service retailers• Limited-service retailers

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Classifying by Merchandise Selection

• Merchandise breadth is the number of different product lines available– Narrow versus broad assortments

• Merchandise depth is the variety of choices available for each specific product– Shallow versus deep assortments

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Store Types

• Convenience stores• Supermarkets• Specialty stores• Department stores• Hypermarket stores

• Discount stores– General

merchandise discount stores

– Off-price retailers– Warehouse clubs– Factory outlet

stores

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Nonstore Retailing

• Any method a firm uses to complete an exchange that does not require a customer visit to a store– Direct selling– Automatic vending

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Direct Selling

• Direct selling occurs when a salesperson presents a product to one individual or a small group, takes orders, and delivers the merchandise– Door-to-Door Sales– Parties and Networks

• party plan systems• multilevel pyramid schemes

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Automatic Vending

• Appealing for selling convenience goods because of small space required, and minimal personnel to maintain and operate– French fries– Software– Levi’s jeans

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E-Commerce and the Customer

• Benefits– Shop 24/7– Less travel– More choices– More information– Price competition– Fast delivery

• Limitations– Lack of security– Fraud– Can’t touch items– Hard to

distinguish color/ texture online

– Expensive to return

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E-Commerce and the Marketer

• Benefits– The world is your

marketplace– Decreases costs– Very specialized

businesses possible

– Real-time pricing– Tracking of

consumer behavior

• Limitations– Lack of security– Must maintain site – Price competition– Conflicts with

conventional retailers

– Legal issues not resolved

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Developing a Store Positioning Strategy

• Store image– how the target market perceives the

store– its market position relative to the

competition• Atmospherics

– the use of color, lighting, scents, furnishings, sounds, and other design elements to create a desired setting

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Store Design: Setting the Stage

• Store layout and traffic flow• Fixture type and merchandise density• The sound of music• Color and lighting• The Actors: Store Personnel• Pricing policy

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Building the Theater: Store Location

• Types of locations• Site selection

– Location planners evaluate trade area and conduct site evaluation • traffic flow, number of parking spaces

available, ease of delivery access, visibility from street, local zoning laws, population characteristics, community life cycle, mobility, degree of competition

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Site Selection

• Reflect growth strategy• Convenient to customers in trade area• Population characteristics• Degree of competition• Target market location

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Issues for Discussion

• Why do retailers usually enter with low-priced goods and then increase over time? Is this the right path for all retailers?

• Is Wal-Mart’s power in the marketplace good for consumers? For retailing? Why do some communities prevent Wal-Mart from opening?

• Do you feel that atmospherics affect your purchase behavior?

• What effect will the growth of e-retailing have on traditional retailing?