Chapter 16

Retailing:
Bricks and Clicks

Chapter Objectives
Define retailing; understand how retailing

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evolves and some ethical issues in retailing

Understand how we classify retailers
Describe the more common forms of
nonstore retailing
Describe B2C e-commerce and its benefits,
limitations, and future promise
Understand the importance of store image
and how a retailer can create a desirable
image
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Real People, Real Choices:

Decision Time at Eskimo Joes

Which strategy should Stan pursue?

Option 1: Convert the beer bar into a fullservice restaurant
Option 2: Continue operating as a beer bar
and try to offset lost beer sales with an
increase in apparel sales
Option 3: Close Eskimo Joes and refocus
resources on building the growing apparel
business
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Retailing: Special Delivery

Retailing:
The process by which goods and
services are sold to consumers for
their personal use
The retailer adds or subtracts value from the
offering with its image, inventory, service
quality, location, and pricing policy

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Retailing: A Mixed (Shopping) Bag

Retailing is big business:

2007 U.S. sales totaled $4.5 trillion
More than one of every ten U.S. workers is
employed in retailing

Retailers belong to a channel of

distribution, providing time, place, and
ownership utility to customers
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The Evolution of Retailing

The wheel-of-retailing hypothesis
Theory that explains how retail firms change,
becoming more upscale as they go through
their life cycle
New types of retailers enter the market by
offering lower-priced goods
They gradually improve facilities, quality and
assortment of merchandise, and amenities as
they increase prices
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The Evolution of Retailing

The retail life cycle
Retailers are born, grow and mature, and
eventually die or become obsolete
Introduction stage: Aggressive entrepreneurs,
pop-up retailers
Growth stage: Sales grow, competition enters,
stores must expand offerings
Maturity stage: Multiple competitors, profits
decline, new products are offered
Decline stage: Retail offerings become
obsolete
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The Evolution Continues:

Whats In Store for the Future?

Factors motivating retail innovation:

Demographics:
Retailers must find new ways to sell to
diverse groups
Offering convenience for working
consumers
Catering to specific age segments
Recognizing ethnic diversity
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The Evolution Continues:

Whats In Store for the Future?

Factors motivating retail innovation:

Technology:
Changing the shopping experience

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Internet created the e-tailing age

Point-of-sale system advances
Social shopping
RFID chips
E-menus

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The Evolution Continues:

Whats In Store for the Future?

Factors motivating retail innovation:

Globalization:
Offers access to growth markets, but firms
need to adjust to different conditions around
the world

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Merchandise mix changes

Local production requirements
Cultural differences
Competition

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Ethical Problems in Retailing

Shrinkage problems may stem from

customers or employees:
Shoplifting
Employee theft
Retail borrowing

Ethical issues in customer dealings:

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Discouraging certain types of customers from

shopping
Selling harmful products to
at risk groups
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Classifying Retail Stores

The classification of retail stores

provides a method by which retailers

can benchmark performance
Several classification methods exist:
Classifying by what they sell (the
merchandise mix)
Classifying by level of service
Classifying by merchandise selection
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Classifying Retail Stores

Classifying by what they sell (the
merchandise mix)

Merchandise mix:
The total set of products offered for sale by a
retailer, including all product lines sold to all
consumer groups. Example: food retailers
Difficult to use for benchmarking due to
merchandise overlap between different store
types (e.g., Super Wal-Marts carry food)
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Classifying Retail Stores

Classifying by level of service

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Self-service retailers:
Shoppers make selections without any help
Limited service retailers:
May offer credit service and merchandise
return services but little else; the majority of
shopper selection is done without assistance
Full-service retailers:
Offer supporting services such as gift
wrapping; trained sales
associates assist buyers
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Classifying Retail Stores

Classifying by merchandise selection
uses two dimensions:
Merchandise breadth:
Number of different product lines
Merchandise depth:
Choices available in each product line

Retailers classified in this manner take

several forms
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Classifying Retail Stores

Major forms retailers take:
Convenience stores
Supermarkets
Specialty stores
Discount stores
General merchandise discount stores
Warehouse clubs
Factory outlet stores

Department stores
Hypermarkets
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Nonstore Retailing
Nonstore retailing:

Any method used to make an exchange

with a product end user that does not
require a customer visit to a store
One type is direct selling:
An interactive sales process in which a
salesperson presents a product to one
individual or a small group, takes orders, and
delivers merchandise
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Nonstore Retailing
Forms of direct selling
Door-to-door sales
Party plan system
Multilevel networking (a master distributor
recruits other people to become distributors)
Beware of illegal pyramid schemes: These
promise large profits from recruiting others to
join the program rather than from any real
investment or sale of goods

Automatic vending
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B2C E-Commerce
Business-to-consumer (B2C)
e-commerce:
Online exchange between companies
and individual consumers

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B2C E-Commerce
Benefits to firm of B2C e-commerce
Facilitates exchanges in global marketplace
Allows businesses to reduce costs
Allows specialized businesses to succeed
Makes real-time price information easily
available

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B2C E-Commerce
Consumer benefits of B2C e-commerce
Increases convenience for consumers
24/7 shopping, less traveling

Greater product access and choice

Greater, faster access to information
Pricing information, electronic communities

Lower prices; virtual auctions

Fast delivery
Can fulfill experiential needs
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B2C E-Commerce
Limitations of B2C e-commerce from
the firms perspective

Security challenges and constant site

maintenance
Developing countries with cash economies
cant easily pay for Internet purchases
Online sales may cannibalize major retailer
store sales
Price competition is intense
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B2C E-Commerce
Limitations of B2C e-commerce from
consumer perspective

Must wait for delivery of non-digital goods

Lack of security and potential for fraud
No chance to touch-and-feel goods
Poor color reproduction on the Internet
Expensive to return items
Potential exists for a breakdown in human
relationships
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B2Cs Effect on Retailings Future

Virtual channels are unlikely to replace

traditional ones
Stores must continue to evolve to lure
shoppers away from computers
In destination retailing, consumers will visit
stores for the total entertainment experience

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Developing a Store Positioning Strategy:

Retailing as Theater

Shopping is part buying, part

entertainment, and part social outlet

Store image:
The way a retailer is perceived in the
marketplace relative to the competition
Atmospherics:
The use of color, lighting, scents, furnishings,
sounds, and other design elements to create
a desired store image
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Developing a Store Positioning Strategy:

Retailing as Theater

Store design: setting the stage

Store layout:
Arrangement of merchandise in the store that
determines traffic flow (grid layout vs. freeflow layout)
Fixture type and merchandise density
The choice of music
Color and lighting (set a moods)
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Developing a Store Positioning Strategy:

Retailing as Theater

Store personnel should complement a

stores image
Dress, attitude, and knowledge are important

Pricing policy
Price points are price ranges of a stores
merchandise
Price points play a role in establishing its
image
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Developing a Store Positioning Strategy:

Retailing as Theater

Build the theatre: store location

Types of store locations

Business districts
Shopping centers
Freestanding retailers
Nontraditional store locations

Site selection is critical

Location, location, location
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Developing a Store Positioning Strategy:

Retailing as Theater

Build the theatre: store location

Site selection must take into account the
stores trade area, or geographic zone that
accounts for the majority of its sales and
customers
Saturated trade areas
Understored trade areas
Overstored trade areas

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Real People, Real Choices:

Decision Made at Woodtronics

Stan chose option 1

Implementation: Eskimo Joes reopened as a
trendy restaurant, and achieved immediate
success. Stan only hires employees who fit
the business culture he developed. Apparel
sales continue to grow
Measuring success: Table turnover, average
sale per customers for restaurant; profit per
square foot for clothing sales
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States of
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Copyright
2009
Pearson
Education,
Inc.

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Publishing as Prentice Hall

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