Retailing: Bricks and Clicks

1. Retailing: Bricks and Clicks

2. Chapter Objectives • Define retailing and understand how retailing evolves • Describe how retailers are classified • 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 to a retail positioning strategy and explain how a retailer can create a desirable image in the marketplace

3. Real People, Real Choices • Eskimo Joe’s (Stan Clark) • A new Oklahoma law raised the legal drinking age from 18 to 21. • How to ensure that Eskimo Joe’s would survive the new law? • Option 1: convert the beer bar into a full-service restaurant. • Option 2: continue operating as a beer • bar and offset declining beer sales • with an increase in apparel sales. • Option 3: close Eskimo Joe’s bar • and refocus on building the growing • apparel business.

4. CABELA’S Retailing: Special Delivery • Retailing: the process by which goods and services are sold to consumers for their personal use • The retailer adds/subtracts value from the offering with its image, inventory, service quality, location, and pricing policy.

5. BARNES and NOBLE Retailing: A Mixed (Shopping) Bag • Retailing is big business: one of every five U.S. workers is employed in retailing. • Retailers belong to a channel of distribution, providing time, place, and ownership utility to customers.

6. The Evolution of Retailing • The wheel-of-retailing hypothesis • New types of retailers enter the market by offering lower-priced goods. • They gradually improve facilities, quality and assortment of merchandise, and amenities and increase prices.

7. Discussion • The wheel-of-retailing theory suggests the retailer’s normal path is to enter the marketplace with lower-priced goods and then increase quality, services, and prices. • --Why do you think this happens? • --Is it the right path for all retailers? • --Why or why not?

8. The Evolution of Retailing (cont’d) • The retail life cycle • Retailers are born, grow and mature, and eventually die or become obsolete. • Introduction stage • Growth stage • Maturity stage • Decline stage

9. The Evolution Continues: What’s “In Store” for the Future? • Demographics: retailers must find new ways to sell to diverse groups. Offering convenience for working consumers Catering to specific age segments Recognizing ethnic diversity

10. The Evolution Continues: What’s “In Store” for the Future? (cont’d) • Technology • Internet and e-tailing • Electronic point-of-sale (POS) systems • Cart-top computer to scan purchases as customers move through store • RFID tags • Intellifit System

11. The Evolution Continues: What’s “In Store” for the Future? (cont’d) • Globalization • Need to adjust to different conditions around the world • Innovative retailing concepts developing overseas and influencing U.S. retailing

12. NEIMAN MARCUS Classifying Retail Stores • Classifying by what they sell: merchandise mix • Classifying by level of service Self-service Full-service Limited service

13. Classifying Retail Stores (cont’d) • Classifying by merchandise selection • Merchandise assortment: selection of products a retailer sells • Merchandise breadth: number of different product lines • Merchandise depth: choices available in each product line

14. Figure 16.1: Classification of Retailers by Merchandise Selection

15. KOHL’S Classifying Retail Stores (cont’d) • Major forms retailers take Convenience stores Supermarkets Specialty stores Discount stores Warehouse clubs Factory outlet stores Department stores Hypermarkets

16. Discussion • Wal-Mart has become a dominant retailer in the U.S. marketplace, accounting for over 30 percent of the total sales of some products. • --Is this good for consumers? • --For the retail industry?

17. MACY’S Discussion • Department stores may be declining in popularity in the United States but remain the primary place to shop in other countries such as Japan. --Why do you think this is so? --Can department stores in the U.S. turn this trend around?

18. Group Activity • Your team are business consultants for a chain of 37 traditional department stores in 12 Midwestern U.S. cities. • The stores’ revenues have declined as specialty stores and hypermarkets have begun to squeeze them out. The chain has asked your group for suggestions to increase its business --Outline your recommendations and present them to the class.

19. LL BEAN Nonstore Retailing • Any method a firm uses to complete an exchange that does not require a customer to visit a store

20. AMWAY Nonstore Retailing (cont’d) • Direct selling • Door-to-door sales • Party plan system • Multilevel network: a master distributor recruits other people to become distributors • Illegal pyramid schemes: people pay money to advance in company, profiting from others who might join • Automatic vending

21. Discussion • Pyramid scheme promoters recruit at frenzied meetings that make potential members fearful of passing up a great opportunity if they don’t join. --Why do people continue to be lured into these schemes? --What do you think should be done to stop these unethical promoters?

22. Discussion • Macy’s and other stores use vending machines to sell electronics such as iPods. List other opportunities for vending machine sales. What are the negative and positive elements of vending sales?

23. B2C E-commerce • Business-to-consumer (B2C) e-commerce: online exchange between companies and individual consumers

24. DOGTOYS.COM B2C E-commerce (cont’d) • Benefits of B2C e-commerce • Facilitates exchanges in global marketplace. • Increases convenience for consumers. • Can fulfill experiential needs. • Allows specialized businesses to succeed. • Makes price information easily available. • Allows businesses to reduce costs.

25. B2C E-commerce (cont’d) • Limitations of B2C e-commerce • Customers must wait to receive products. • Sites suffer from poor design. • Security is a concern to consumers/marketers. • Internet fraud is a danger. • People need “touch-and-feel” information.

26. PEAPOD.COM B2C E-commerce (cont’d) • Limitations of B2C e-commerce (continued) Firms need “bricks-and-mortar” presence to maintain base of loyal customers. Developing countries with cash economies can’t easily pay for Internet purchases. Online inventory may cannibalize major retailer store sales.

27. Discussion • Experts predict a rosy future for B2C e-commerce, with exponential increases in Internet sales of some product categories within a few years. • --What effect do you think the growth of e-retailing will have on traditional retailing? • --In what ways will this be good for consumers, and in what ways will it not be so good?

28. B2C’s Effect on the Future of Retailing • Virtual channels are unlikely to replace traditional ones. • Stores must continue to evolve to lure shoppers away from computers. • In destination retail, consumers will visit stores for total entertainment experience.

29. Retailing as Theater • 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 setting

30. Figure 16.2: Mapping a Store’s Personality

31. Store Image (cont’d) • Store design: setting the stage • Store layout: arrangement of merchandise in the store that determines traffic flow (grid layout vs. free-flow layout) • Fixture type and merchandise density • The sound of music • Color and lighting to set a mood

32. Store Image (cont’d) • Store personnel: should complement a store’s image • Pricing policy Price points/ranges of store’s merchandise play a role in establishing its image

33. Group Activity • You and two friends decide to open a combination coffee shop and bookstore near your college. To attract college students and other customers, you’ll need to carefully design the store image. • --Develop a detailed plan that • specifies how your group • will use atmospherics • to create the store image.

34. Retailing as Theater (cont’d) • Store location • Types of store locations • Business districts • Shopping centers • Freestanding retailers • Nontraditional store locations

35. Retailing as Theater (cont’d) • Store location (continued) • Site selection • Store’s trade area: geographic zone that accounts for the majority of its sales and customers • Saturated trade area • Understored trade area • Overstored trade area

36. Group Activity • Your client is a local caterer planning to open a new retail outlet selling take-out gourmet dinners. • Your group of marketing consultants is examining locations: the central business district, a shopping center, a freestanding entity, or a nontraditional location. • --Outline the advantages and disadvantages of each type of location.

37. ESKIMOJOES.COM Real People, Real Choices • Eskimo Joe’s (Stan Clark) • Stan chose option 1: convert the beer bar to a full- service restaurant focused on selling great food. The success was immediate, and Stan credits the result with paying close attention to the quality of food and service.

38. Marketing Plan Exercise • Think about a new retail venture, a specialty store that sells timepieces such as men’s and ladies’ watches and clocks. • --What retailing strategies do you recommend for the first two years of the business—what merchandise, what store image, and what location(s)? • --What long-term retailing strategies do you recommend?

39. Marketing in Action Case:You Make the Call • What is the decision facing IKEA? • What factors are important in understanding this decision situation? • What are the alternatives? • What decision(s) do you recommend? • What are some ways to implement your recommendation?