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Chapter Thirteen: Retailing Chapter Objectives 1. Explain the issues manufacturers consider when choosing retail partners 2. Identify what types of retailers are available to distribute products 3. Describe how retailers use the four Ps to create value for customers 4. Describe the multichannel options available to retailers 5. Explain how and why multichannel retailing is used Annotated Chapter Outline PowerPoint Slides Instructor’s Notes The chapter objectives and roadmap are intended to help students understand the content to be discussed. Opening Vignette: Apple Store Apple became a successful retailer out of necessity because other retailers had no incentive to carry its products. Since then it has become one of Fortune’s most admired companies. Its retail outlets are carefully designed offering products, services, workshops, and exceptional customer service, all leading to the best per square foot sales in the country. Apple retail stores have been critical to the success of the company and account for 20% of revenues. They have become so successful that recently “fake” Apple stores have been opened in India and China to attract customers who think they are getting genuine Apple merchandise. Ask students: why has Apple been so successful? Group activity: List your favorite retailers. How do these retailers create value for you? Students should provide diverse lists that you can use as a basis for the remaining retail discussions. Topic One: Choosing Retail Partners Retailing refers to business activities that add value to products and services sold to consumers for their personal or family use, including products bought in stores, through catalogues, or over the Internet, as well as services. Wholesalers buy, take title to, often store goods in large quantities, and then resell the goods (usually in smaller quantities) to retailers or industrial or business users. This is an overview and each stage is presented on the following slides. Group activity: List your favourite retailers. How do these retailers create value for you? Students should provide diverse lists that you can use as a basis for the remaining retail discussions. Choosing Retail Partners 1. Channel Structure: degree of vertical integration, manufacturer’s brand, power of manufacturer and retailer 2. Customer Expectations: how manufacturers determine which retailers would be best for consumers and where consumers expect to find certain products 3. Channel Member Characteristics: Larger firms often find that by performing the channel functions themselves, they can gain more control, be more efficient, and save money. 4. Distribution Intensity Ask students to describe what is meant by “degree of vertical integration”. This is discussed in chapter 12 and refers to a supply chain where the members act as a unified system. Ask students how vertical integration affects a manufacturer who is introducing a new product and choosing a retail partner. Students will mention that if the manufacturer and retailer already have a relationship from previous products that the retailer will be more likely to accept the new product. Ask Students: Why might Birkenstock choose exclusive distribution intensity? Answer: Birkenstock’s can only be purchased through certain retailers – this helps control conflict between retailers and gives the manufacturer better control. Some might argue that for products in the later stages of the product life cycle, it implies higher quality to the end consumer. Topic Two: Types of Retailers A. Food Retailers B. General Merchandise Retailers This slide can be used as an introduction to a detailed discussion of this topic or as a shortened version. Answer B I. Food Retailers Take Three Main Types. A. Conventional supermarkets offer groceries, meat, and produce, along with limited sales of nonfood items such as health and beauty aids and general merchandise, in a self-service format. B. Big-box food retailers include supercentres, hypermarkets, and warehouse clubs and carry both food and nonfood items in larger stores than conventional supermarkets. C. Convenience stores provide a limited number of items at convenient locations in small stores with speedy checkout procedures. Ask students: in what circumstances do you shop at each type of food retailer? How do the price, selection, and quality vary across each type? Case-in-Point Series This slide sets up the Case in Point which follows. Competition among food retailers has prompted new innovations, such as those that cater to more upscale, knowledgeable buyers. Pete’s Frootique is a Nova Scotia & New Brunswick based grocery chain. It carries more and a wider variety of fresh produce items than traditional grocery stores. It also provides nutrition and food preparation classes on site as well as an onsite dietician and has an extremely loyal following. Ask students: How does Pete’s Frootique create value beyond that offered by a traditional grocery retailer? Click on the link in the title to take students to the store’s website. II. General Merchandise Retailers Comprise Six Categories. A. Discount stores offer a broad variety of merchandise, limited service, and low prices. B. Specialty stores concentrate on a few complementary merchandise categories in relatively small shops. C. Category specialists offer a narrow variety but a deep assortment of merchandise and may become category killers, which so overwhelm the category that other retailers cannot compete. D. Department stores carry many different types of merchandise and lots of variations, offer some customer service, and are organized into separate areas. E. Drugstores concentrate on health and personal grooming merchandise, though pharmaceuticals often represent more than 60% of their sales. F. Off-price retailers offer inconsistent assortments of merchandise at relatively low prices, typically purchased from manufacturers or other retailers with excess inventory. 1. Extreme value retailers are a particular type of off-price retailers that usually appear in lower-income urban or rural areas. 2. They are smaller than traditional discount stores. Group activity: Identify a retailer in each of these categories. Discuss how that specific retailer creates value for its target consumers. Remind students to use the 4Ps framework for this exercise. For example, Abercrombie & Fitch is a specialty store that carries trendy, high-quality, high-priced products. Its edgy advertising appeals to consumers and stores are located in upscale malls or shopping areas. Answer A Case-in-Point Series Specialty stores must offer their target market something more than what other retailers offer, because they often charge a premium price. Entrepreneurial Marketing 13.1 Giant Tiger Provides Value Topic Three: Creating a Retail Strategy Using the Four Ps This slide introduces how the 4Ps are used in retailing. More in depth slides follow. II. The First P Is Product. A. Providing the right mix of merchandise and services to satisfy the needs of the target market is one of retailers’ most fundamental activities. B. Retailers store or hold inventory until consumers request it. C. Retailers also offer private label (store) brands, which are available only from that retailer. What is the most important thing that retailers do? They provide assortments to customers. Group activity: Divide the class into groups. Tell them that the classroom represents a new store. Have them identify a target market. Ask them to decide what they are going to put into the store. Have them consider both variety (number of categories) and assortment (number of SKUs within a category.) III. The Second P Is Price. A. Price defines the value of both the merchandise and the service. B. A general price range associated with a particular store helps define its image. How Do Retailers Create Value? • Consumer Preferences Change. • Definitions of price and quality differ. • Lifestyles have evolved toward greater casualness. • As definitions of price and quality change, so does the definition of value. • Retailers must respond by creating value through methods other than low price. Group activity continued: Now have them decide the general price range for their store, and justify their recommendation. Build-a-Bear Workshops provides entertainment to attract customers. Ask students: What value does Build-a-Bear offer? The consumer experience includes personalization and involvement in creating unique products. IV. The Third P Is Promotion. B. Retailers use a wide variety of promotions, both within their retail environment and through mass media. C. Promotions help get customers into stores, and then stimulate purchases after they are in the store. D. Promotions can take many forms. A. Unusual or exciting stores atmospherics, which influence consumers’ perceptions of value and thus their subsequent patronage. B. Personal selling and customer service representatives. C. CRM databases to develop loyalty programs. E. Share of wallet refers to the percentage of a customer’s purchases from that particular retailer. Discuss how promotions affect consumers’ perceptions of value, patronage intentions, purchase, loyalty, and share of wallet devoted to a particular retailer, both individually and in combination. Group activity continued: Tell the students they have a fixed amount to spend on promotion, including personal selling. How would they divide up their promotional dollar? Justify their recommendation. V. The Fourth P Is Place. A. Convenience is a key ingredient to success, and location is an important part of convenience. B. Customers choose stores on the basis of where they are located C. Supply chain management, part of the fourth P, is responsible for getting the right merchandise to customers when they want it. In retailing there are two aspects to “place.” The first is location, and the second is supply chain management. Both are important. Location is important because it is one of consumers’ most important criteria in choosing a retailer and it is a very long-term investment. Group activity continued: Have students choose a location and justify it. Also, have them describe how they would design their supply chain, i.e., use of wholesalers versus distribution centers; direct store delivery versus, delivery to distribution centers; traditional warehouses versus cross-docking, etc. The Changing Retail Landscape The Wheel of Retailing A. A second view of how new forms of retail outlets compete in the market. B. Retailers enter with low prices, low margins, low status but over time add more service, raise prices and earn higher margins and status. To illustrate how McDonalds is progressing in the wheel of retailing, click on the links to show photos of two redesigned, upscale restaurants in Germany and in Canada. Topic Four: Channels for Selling to Consumers I. Bricks-and-Mortar Retailers Are Traditional Retail Stores. II. Trade Areas Define Potential Customers According to Geographic Area. III. Multichannel Retailers Sell Merchandise in Multiple Retail Channels, e.g. stores, kiosks, catalogues and the Internet. Each channel offers its own unique benefits. Among others, online stores offer great convenience, and a wide selection available at any time. Consumers view offerings from the comfort of their home or office. Merchandise gets delivered directly to consumers. This slide introduces channels for selling to consumers. More in depth slides follow. Ask students what they like to buy in stores vs. catalogue vs. online? Ask students: Have you ever started shopping online, and then visited the store to make the actual purchase? What kind of product did you buy using this method? The Internet has also opened opportunities to sell beyond a limited geographic region. Ask students: Have you ever purchased something online from a retailer that does not have a physical store in your area? This will hopefully identify niche retailers that have expanded their trade area by using the Internet. Shopping over the Internet provides the convenience offered by catalogs and other nonstory formats. However, the Internet, compared with store and catalogue channels, also has the potential to offer a greater selection of products and more personalized information about products and services in a relatively short amount of time. It also offers sellers the unique opportunity to collect information about how consumers shop—information that they can use to improve the shopping experience across all channels. The Internet has radically altered the retail marketplace. Many traditional bricks-and-mortar retailers create synergy between online and traditional retailing. Multi-channel customers buy more than single channel customers. Ask students: Have you ever started shopping online, and then visited the store to make the actual purchase? What kind of product did you buy using this method? The Internet has also opened opportunities to sell beyond a limited geographic region. Ask students: Have you ever purchased something online from a retailer that does not have a physical store in your area? This will hopefully identify niche retailers that have expanded their trade area by using the Internet. Internet Channel The internet can supply research? Ask students what information Home Depot might gather research from web visits and how they would use it? Students might mention that they will search for products that the company does not currently stock. They might see products that consumers browse often but purchase little. For instance, they might look for lamps quite often but this is a low seller for Home Depot? What is it about the product that makes people come looking and leave not buying? Ask students when they are nervous to enter their credit card information online? How do they determine if a site is credible? How do they feel about privacy? Benefits Provided by Different Channels Use Exhibit 13.4 in the textbook to initiate a discussion of the advantages students see in each of these unique channels. Many students may feel that shopping in stores is better than online because they can try things on. Remind students that consumers who shop at multichannel retailers (i.e., store, catalogue, and Internet) typically buy more than those who shop in only one retail channel. Use this exhibit to supplement the discussion the last slide if needed. Answer B Topic 5: Evolution Toward Multichannel Marketing 1. Overcoming the Limitations of an Existing Format 2. Expanding Market Presence 3. Increasing Share of Wallet 4. Gaining Insights into Customers’ Shopping Behaviour 5. Will Manufacturers Bypass Retailers to Sell Directly to Consumers? Instructor Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929
