C H A P T E R

14
Retailing

McGraw-Hill/Irwin

2007 The McGraw-Hill Companies, Inc. All rights rese

Learning Objectives
After studying this chapter, you should be able to:

Understand the economic importance of retailing and its

role in the marketing channel. Cite evidence of the globalization of retailing. Discuss some of the advances in retailing technology. Explain the reasons behind the growth of nonstore retailing. Describe key factors in the retail marketing environment, and understand how they relate to retail strategy. Cite important ethical and legal issues facing retailers.

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Best Buy
Best Buy, the nations largest seller of electronics, is doing what many retail analysts believe all retailers should do: Focus on certain types of customers and ignore the rest. For the chosen customers, Best Buy is creating more value by concentrating on their needs and preferences. For those not chosen, Best Buy would be happy if those customers took their business elsewhere.
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Retailers Uniqueness in Channel

Sell Smaller Quantities, More Frequently

Retailers Uniqueness Emphasize Atmospherics

Bearden Marketing 5th Ed

Provide Assortments
14-4

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The Role of Retailing

Retailing
An important part of many marketing channels, includes all the activities involved in selling products and services to the ultimate, or final, consumer.. Retail sales are sales to final consumers; wholesale sales are those to other businesses that in turn resell the product or service, or use it in running their own businesses.

Retail Sales

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Retail versus Wholesale

To be classified as a retailer, a firms retail sales must equal or exceed 50 percent of its total revenues. Firms with less than 50 percent retail sales are classified as wholesalers. Wal-Mart was reminded of the distinction when its Sams Wholesale Club was forced to change its name to Sams Club in states in which its retail sales exceeded the 50 percent benchmark. Ultimately, the word wholesale was dropped from all Sams Club store names.
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2007 The McGraw-Hill Companies, Inc. All rights reser

Economic Importance
Retailing is a major force in the economy. Three million U.S. retailers employ 14 million people and generate an astonishing $2.5 trillion in annual revenues. This translates into a $9,100 retail expenditure for every man, woman, and child in the United States.

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2007 The McGraw-Hill Companies, Inc. All rights reser

Types of Retailers
Independent Retailers
Independent retailers own and operate only one retail outlet they account for more than three-fourths of all retail establishments.

Chains

A retail chain owns and operates multiple retail outlets. By far, chain stores sell more merchandise than any other category of retailers.

more
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Types of Retailers (cont)

Retail franchising is a form of chain ownership in which a franchisee pays the franchisor fees or royalties and agrees to run the franchise by prescribed norms, in exchange for use of the franchisors name.

more
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Types of New Products (cont)

Leased Departments
Leased departments are sections in a retail store that the owner rents to a second party.

Responding to competitive pressures Cooperatives exerted by the buying power of chain stores, independent retailers sometimes band together to form retail cooperatives. Although each store remains independently owned, the retail cooperative generally adopts a common name and storefront.
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14-10

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Trends in Retailing
Global Retailing Trends in Retailing Technological Advances Customer Service

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14-11

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Nonstore Retailing
Nonstore retailing: sales outside a physical structure.
Direct Retailing Direct retailing is the portion of direct marketing in which ultimate consumers, not business customers, do the buying. Direct selling: the sale of a consumer product or service, person-to-person, away from a fixed retail location. Vending machines allow customers to purchase and receive merchandise from a machine.
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Direct Selling Vending Machine Sales

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Customer Service in Retailing

Customer service refers to the activities that increase the quality and value customers receive when they shop and purchase merchandise. Retailers rush to give lip service to the importance of customer service, but many still fall woefully short of providing it.

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Nonstore Retailing

Consumers can buy almost anything via nonstore retailing. Amazon.com, which began as an online bookseller, now offers thousands of products ranging from home electronics to baby toys.
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14-14

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Developing Retail Strategy

The scope of retail products and services and the demands of consumers combine to produce a constantly changing business environment. A successful retailer must effectively manipulate the factors it can control to survive in a largely uncontrollable environment.

Exhibit 14-4

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Evaluating Retail Locations

The old sayingand experts confirm itis that the three most important factors in retailing are location, location, and location.

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Scrambled Merchandising
The practice of adding unrelated product categories to existing product lines is referred to as scrambled merchandising.
Exhibit 14-6

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2007 The McGraw-Hill Companies, Inc. All rights reser

Scrambled Merchandising

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Ethical and Legal Issues

Consumer Fraud Ecological Considerations

Supplier Labor Practices

Use of Customer Information

Ethical and Legal Issues in Retailing

Slotting Allowances

Retail Theft

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14-19

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Summary
After studying this chapter, you should be able to:

Understand the economic importance of retailing and its role

in the marketing channel. Cite evidence of the globalization of retailing. Discuss some of the advances in retailing technology. Explain the reasons behind the growth of nonstore retailing. Describe key factors in the retail marketing environment, and understand how they relate to retail strategy. Cite important ethical and legal issues facing retailers.

Bearden Marketing 5th Ed

14-20

2007 The McGraw-Hill Companies, Inc. All rights reser