-Importance of retailing -Classifying retailers -Types of retailers -The rise of non-store retailing [SLIDE 1] Retailing represents all of the activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use. Retailers provide groceries, hair care, cloths, books and many other goods and services, mirroring the diverse needs, wants, and trends of society. Approximately two-thirds of the US gross domestic product (GDP) comes from retail activity, and retail sales account for nearly 30 percent of all consumer spending. While the National Retail Federation reports that more than 98 percent of all retail businesses employ less than 50 people, large retailers have a major impact. Walmart’s 2018 revenue was reported as $514.41 billion. Compared to the national GDP in 2018, as reported by the International Monetary Fund (IMF), that would place Walmart as the 25th largest nation by GDP, between Argentina and Thailand. [SLIDE 2] Retailers can be classified in several ways, such as type of ownership, level of service, product assortment, and price. The major classifications of retailers are by: -Ownership type -Level of service -Product assortment -Price -Types of in-store retailers [SLIDE 3] The first way to classify retailers is by the type of ownership. There are three types: -Independent retailer: owned by a single person or partnership and not operated as part of a larger retail institution. Most retailers are independent. -Chain store: multiple stores owned and operated by a single organization, with the home office typically buying inventory for all stores. -Franchise: operators are granted a license to operate and sell a product. Two terms matter to differentiate the parties in a franchise agreement. The franchisor is the originator of a trade name, product, method of operation, and the like that grants operations rights to another party to sell the product. The franchisee is the individual or business that is granted the right to sell the franchisor’s product. [SLIDE 4] The level of services provided alongside goods is another differentiating feature of retail stores. Luxury goods and high-end clothing stores provide alterations, credit, delivery, consulting, liberal return policies and more. One the other end of the services spectrum, many factory outlets and warehouse stores provide no services. Goods are laid out in an open format and customers must do their own investigations, acquisition, handling, product assembly, and use. The extreme low end of the services spectrum is vending machines and kiosks. Each retailer makes a marketing mix decision about where to fall on the services spectrum. [SLIDE 5] Product assortment is defined with two vectors: -Width: the number of product types offered -Depth: the number of brands offered for each product type Stores balance the two vectors. For instance, a specialty store such as Office Depot or PetSmart has a narrow width focusing on a specific area such as office and pet products, while having a wide variety of brands for each product type. PetSmart and Petco can carry twenty types of dog and cat food. On the other extreme, broad spectrum retailers such as Target and Walmart, and discount outlets, can have a broad width of products carried but a shallow depth with only a few brands of each product. [SLIDE 6] Historically, major retailers have charged “suggested retail price”, the price provided by the manufacturer. Discounters, factory outlets , and off-price retailers use low prices and discounts to attract shoppers, often by focusing on fewer services, product overruns, and even slightly damaged goods. Gross margin is the amount of money the retailer makes as a percentage of sales after the costs of goods sold is subtracted. The rough difference in gross margin by retail type (discussed later in the lesson) is listed in the chart provided in the table provided earlier in this lesson. The growth of ecommerce and the immediacy of information about demand has meant that a number of brick-and-mortar stores are taking the idea of dynamic pricing from online retailers. Prices can change hour-to-hour, and even minute-to-minute, depending on demand for the products. Customers can now quickly compare prices from multiple retailers, and so are less and less likely to pay full price. List prices are becoming more of a suggestion, so dynamic pricing can help retailers remain competitive in an increasingly connected world. [SLIDE 7] Traditionally, retailers fall into one of several categories. While those are blending, for instance when supermarkets add pharmacies while discounters are adding groceries, it is still good to understand the basic categories. Those are as follows: -Department stores: contains different areas, or departments, for different product types (men’s clothing, kitchen goods, bedding). -Specialty stores: specializes in one type of merchandise (jewelry, clothing). -Supermarkets: large, departmentalized, self-service retailer that specializes in food and has some nonfood items. Pharmacies, banks and other services are increasingly being included. -Drugstores: stocks pharmacy and health care related products and services as the main purpose. -Convenience stores: miniature supermarkets carrying only a limited line of high turnover convenience goods. Higher prices for non-staple items (e.g.: milk) are supported by longer hours and more locations. -Restaurants: combine tangible goods, food and drink, with the services of food preparation and presentation. -Discount stores: compete on the basis of low price, high turnover, and high volume. [SLIDE 8] The growth of discount channels means that there are multiple classifications of discount retailers: -Full line: breadth of products within the product category. Walmart. -Supercenters: larger retailer combining large selection of food and nonfood items. Walmart and Target are both adding these. -Specialty discount: offers a nearly complete selection of a single-line merchandise. Foot Locker. -Warehouse club: large, no-frills retailer that sells bulk quantitates at volume discount in exchange for membership. Costco, Sam’s Club. -Off-price retailer: Charges 25% or more less than traditional retailers by buying inventory for cash, and usually does not request return privileges. There are two types. -Factory outlet: off-price retailers owned and operated by a manufacturer. -Used good: items purchased from another type of retailer are resold to different customers. Goodwill, eBay. [SLIDE 9] The formats previously discussed are all based on physical stores. However, there are options that avoid requiring consumers to visit a physical facility, including: -eCommerce/e-tailing: shop over the internet, have items show up at your door. The massive force in nonstore retailing. -Automatic vending: machines providing products. Soda and candy machines are the most well known, but more products are being added. Meat is available in France and some other countries. -Self-service technologies: ATMs, self-service gas pumps, and other machines that allow the consumer to do business. Lack of human service can be good but can cause problems. Some ATMs are now adding video conferencing to address issues. -Direct retailing: door-to-door at home and office. Tupperware and Mary Kay are examples. -Direct marketing: techniques to get consumers to make purchases from home, office, or other non-retail locations. Three primary techniques are -Telemarketing: calls to phones. Automated dialing has created a flood of telemarking calls and governments have began to investigate legislation to limit calls. -Direct mail: postal mail with advertisements and catalogs. With older generations, it is still a major marketing tool. -Shop-at-home television: reaching consumers via television channels such as HSN and QVC, plus late-night infomercials. The Internet has led to a large amount of data available including information about individuals and households. Microtargeting is the use of big data and data analytics to isolate customers with great precision. This technique is not only used in ecommerce but can be used in aiming direct retailing and direct marketing, not to mention in helping to locate machines used in automatic vending and self-service techniques.