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Ch 11 - Retailing & Wholesaling - Coggle Diagram
Ch 11 - Retailing & Wholesaling
The Value of Retailing
Consumer Utilities Offered by Retailing
Utilities like time, place, form, information, position are offered by most retailers in varying degrees, but one utility often emphasized more than others
Examples
Putting minibanks in supermarkets puts bank's products & services close to consumer, providing place utility
Retail kiosks continue to grow in supermarkets & drugstores as self-source tech to improve service
Hudson's makes purchase easier via diff payment methods (possession utility)
Form utility (production or alteration of product) offered by Ralph Lauren through online "create your own" shirts program
Well-stocked toy shelves year-round is time utility
Many retailers offer combination of the 4 basic utilities - Supermarkets offer convenient locations (place) & open 24/7 (time)
The Canadian Retail Scene
2016 - Canadian retailers had revenues of over $532 billion
$115 billion was spent on food & drink
Supermarkets make up majority of retail spend - So 3 largest retailers in CA in sales are in food business
Growing trend for American retailers to open locations in CA, but entering Canadian retail scene is hard
The Global Retail Picture
Very important for global economy
Difficult retail climate for store owners (terrorism, economic downturn, reduced tourism, political crises, low consumer confidence) - So lower sales
Consumers are empowered & it's more difficult to gain & maintain their loyalty
Tech is making industry more sophisticated & streamlined & consolidation makes some competitors large & very powerful
Some developing countries or emerging markets in Asia & Eastern Europe exping solid growth & dev modern types of retailing
China, Indian, Russia will see some of the biggest growth opp in retail over next few years
Retailing
All activities involved in selling, renting, & providing goods & services to ultimate customers for personal, family, or household use
Retailing makes shopping a way to get necessities, social activity & adventure. It also brings producers & consumers together & creates customer value & significant impact on economy
5 trends retailers need to prep for
Technological disruption
Experiential retail
Hybridization of retail
Changing shopping habits
Customer relationship
Forms of Ownership
Distinguishes retail outlets on basis of whether individuals, corporate chains, or contractual systems own or control the outlet
Independent Retailer
Independent business, owned by individual
Small independent retailers account for more than 60% of total retail trade in CA
For customers, these stores offer convenience, quality personal service, lifestyle compatibility - Cause smaller orgs able to adapt & be more efficient than larger orgs
Corporate Chain
Multiple outlets under common ownership
Centralization of decision-making & purchasing is common
Advantage in dealing with manufacturers esp. as size of chain grows - Bigger chains can bargain with manufacturer to obtain good service or volume discounts on orders
Consumers benefit - Multiple outlets with similar merchandise & consistent management policies
RFID incorporated in product for tracking purposes - Improves efficiency of inventory tracking & management
Contractual System
Independently owned stores use leverage to act like chain
Include retailer-sponsored cooperatives, wholesaler-sponsored voluntary chains & franchises
Cooperatives & Wholesaler-sponsored voluntary chains
Take advantage of volume discounts commonly available to chains & give impression of being large chain (viewed favourably by some consumers)
Franchise
Franchisor
Usually assists in selecting store location, setting up store, advertising, & training personnel
Provides step-by-step procedures for major aspects of business & guidelines for most likely decisions a franchisee will confront
Franchisee
Pays one-time franchise fee & annual royalty, usually tied to store's sales
By selling franchises, orgs reduce cost of expansions but lose some control
To ensure mutual benefits to all parties involved, good franchisors concentrates on enhancing image & reputation of franchise name
Target Market Selection & Positioning
Selecting a Target Market
Focus on detailed customer profiles
Understand wants & needs, knowing customer preferences, analyzing behaviour, deciding how to craft all dimensions of retail concept to appeal to targeted customer
Challenge - No longer enough to appeal to customers, now must interest, engage, delight customers to gain loyalty
Use geographic, demographic, psychographic, behavioristic info to define market - Used to adjust retail mix
Retail Positioning
Shopper Marketing
Discipline designed to understand how consumers behave as shoppers in different channels & formats
Extends outside of store, to place & time when consumers first thinks about purchasing product
It's multichannel practice that makes use of traditional media, new media, direct marketing, loyalty, trade promotion, etc.
New to Canada
Consumption of Goods & Services
Something traditional marketers, whose focus exclusively focuses on understanding consumers, doesn't understand
Must understand
shoppers
- Consumers when they are in a shopping mode
Retailing Mix
Includes product & service considerations, retail pricing, physical location, communications. All components focus on consumer
Products & Services
One of the first decisions retailers make is what they are going to sell. Usually both services & products are offered
Level of Service
Most customers perceive little variation in retail outlets by form of ownership
Differences more obvious for lvl of service
Used to describe degree of service provided to customers
Self-service
Extreme end of continuum cause customer performs many functions & little is provided by outlet
Home building-supply outlets & gas station use this. Costco too
All non-essential customer services eliminated
Limited Service
Provides some services (e.g. credit & merchandise return)
Customers responsible for most shopping activities, but salespeople available in store
Full Service
Used by most specialty stores & dept stores & provide many services to customers
Merchandise Mix
Describes how many different types of products a store carries & in what assortment
Merchandise selection is one of major attracting factors for customers, so choices & combos must be made carefully & continually updated to reflect current trends & tastes
Involves finding sources of supply of products, having them manufactured & managing inventory & warehousing
Breadth of Line
Variety of different lines a store carries
Stores that carry product lines, with limited depth - General merchandise stores
Traditionally, outlets carried related lines of goods
Today, scrambled merchandising is common
Scrambled Merchandising
Offers several unrelated product lines in single store
Makes it convenient for consumers cause don't have to go so many stores to buy things
But for retailers - Means more competition between very dissimilar types of retail outlets
Intertype competition
Competition between very dissimilar types of retail outlets
Example
Local bakery may compete with dept store, discount outlet, local gas stations
Depth of Line
Assortment of products within each product line
Stores that carry large assortment (depth) of related line of items are limited-line stores
Stores that carry lots of depth in one primary line of merchandise are single-line stores
Both limited- & single-line stores often called specialty outlets
Specialty Outlets
Focus on one type of product (e.g. electronics/Best Buy), office supplies (Staples), or books (Indigo) at very competitive prices
Outlets referred to in the trade as category killers cause they dominate market
Planograms
Visual diagram or drawing of fixtures & products that illustrates how & where retail products should be placed on store shelf
Also shows how many facings should be allocated for each stock-keeping unit (SKU)
Arranged so fastest-moving high-margin products get most space on shelf
As competition increases, suppliers & retailers become more aware of importance of correctly merchandising their products
Store Atmosphere
Related to positioning of store
Physical characteristics of store that provide overall impression to consumer
Characteristics consist of exterior & interior appearance & physical layout of store
Physical Location
Central Business District
Oldest retail setting & usually in downtown area. Before outflow to suburbs, it was the major shopping area
Regional Shopping Centres
Consist of 50-160 stores that typically attract customers who live or work in a 5-15km range. Large shopping areas often contain 2-3 anchor stores (known nationally or regionally)
Community Shopping Centre
Typically has one primary store (usually dept store branch) & 20-40 smaller outlets. Generally serve pop of consumers who are 2-5km range
Strip Location
Clusters of stores that serve ppl in 5-10minute range. Composition of these stores usually unplanned.
Power Centre
A variation of a strip location. Large shopping strip with many national stores. Seen as having the convenient location found in many strip centres & the added power of national stores. Large strips often have 205 anchor stores + supermarket which brings shopper on a weekly basis
Communications
Each format allows retailers to offer unique benefits & meet particular needs of various customer groups
Multichannel Retailers
Utilize & integrate combination of traditional store & non-store formats like catalogues & online retailing
Integrated channels make shopping simpler & more convenient
Consumer can research choices online or in catalogue & then make purchase online, over phone, or closest store
Allows retailers to reach broader profile of customers
Online retailing may cannibalize catalogue business to some degree, but web transactions costs half as much to process as catalogue order
Benefit from synergy of sharing info among different channel operations
Retail Pricing
To set price, must decide on markup
Markup is how much should be added to cost the retailer paid for product to reach final selling price
Diff between final selling price & retailer costs is gross margin
Discounting product or taking markdown
Happens when product doesn't sell at original price & adjustment needed
Often new models or styles force price of existing models to be marked down
Can be used to increase demand for related products
Timing of markdown import - Many retailers take markdown as soon as sales fall off, to free up selling space & obtain cash
But some stores delay markdowns to discourage bargain hunters & maintain image of quality
Mostly planned, but many retailers use discounts as part of regular merchandising policy
In Canada retailers who emphasize consistently low prices & eliminate most markdowns with strategy called everyday low pricing
Consumers often use price as indicator of product quality but brand name of product & image of store are import decision factors in these situations
Shrinkage
Or breakage & theft of merchandise by customers & employees happens when prices kept low
50% of thefts made by employees
Off-Price Retailing
Selling brand-name merchandise at lower than regular prices
Diff to discount cause off-price merchandise is bought by retailer from manufacturers with excess inventory at prices below wholesale prices, but discounted is bought at full wholesale price but takes less of a markup than traditional dept store
Cause of diff in way merchandise purchased by retailer, selection at an off-price retailer is unpredictable & searching for bargains has become popular for many consumers
Savings to consumer at off-price retailers is as high as 70% off prices of traditional dept store
Non-Store Retailing
Automatic Vending & Kiosks
Maintaining & operating vending machines is expensive, so product prices in vending machines tend to be higher than in stores
Improved tech will soon make vending machines easier to use by reducing need for cash
Use of wireless tech to notify retailers when machines are empty is one reason automatic merchandising sales expected to increase in future
Television Home Shopping
Limitation is lack of buyer-seller interaction
But new Internet tech now allows consumers to explore different possibilities
Direct Marketing from a Retailing Perspective
Interactive process of marketing that uses advertising media or direct consumer contact to offer products or services
When direct communication to consumer or business market is intended to generate response from recipient, direct marketing is used
Direct Mail & Catalogue
Attractive cause eliminates cost of store & clerks
Cost of traditional retail store more than 2x amount to acquire new customer than it costs a catalogue retailer
Cause catalogues improve marketing efficiency through segmentation & targeting
They create customer value by providing fast & convenient means of making a purchase
Canada
Amount spent on direct mail catalogue merchandise continues to increase, internationally spending also increasing
Reason for catalogue growth
Traditional retailers adding catalogue operations
Many Internet retailers have added catalogues
As consumers' direct mail purchases have increased, number of catalogues & number of products sold through catalogues increased
Competition & recent increases in postal rates have combined to cause catalogue retailers to focus on proven customers rather than prospects
New approach used by many catalogue retailers is to send specialty catalogues to market niches IDed in their databases
Telemarketing
Uses telephone to interact with & sell directly to consumers
Often viewed as more efficient way of targeting consumers than direct mail but both techniques often used together
Grown in popularity as companies search for ways to cut costs but still provide convenient access to customers
25 years ago telemarketing industry generated $3.1 billion in sales & planned to employ one million Canadians by year 2000. By 2007, 250,000 Canadians employed by industry & it generates 17 billion in sales annually
Issues like industry standards, ethical guidelines, new privacy laws evolving to provide balance between varying perspectives
CRTC institued national DNCL - Created to enable CA consumers to reduce # of unsolicited telemarketing calls
Every year 1000s of CAS raise concenrs about receiving unwanted telemarketing calls, despite being on DNCL
Direct Selling
[Door-to-door retailing]
Direct sales of goods & services to consumers through personal interactions & demonstrations in their home or office
Variety of companies provide consumers with personalized service & convenience but sales have declining as retail chains start carry similar products at discounted prices & as increasing number of dual-career households reduces number of potential buyers who can be found at home
Response to decline
Many direct-selling retailers are expanding online & into other markets
Likely to continue to grow in markets where lack of effective distribution channels increases importance of door-to-door convenience & where lack of consumer knowledge about products & brands will increase need for person-to-person approach
It helps maximize growth & customer loyalty
Online Retailing
Mobile Banking & Cashless Future
One of the biggest probs that online retailers face is nearly 2/3 of online shoppers make it to checkout then leave to compare shipping costs & prices on other sites
Of those who leave, 70% don't return
Solution - Offer comparison of competitors' offerings, improve online retailing exp by adding experiential/interactive, activities to site
Why Consumers Shop & Buy Online
Convenience
Websites must be easy to locate & navigate, image downloads must be fast
Choice
Selection - Numerous websites for almost anything consumers want
Assistance - Interactive capabilities of Internet/web enabled technologies
Both help customers to make informed choices
Communication
Internet/web-enabled capabilities make possible highly interactive & individualized info & exchange environ for shoppers & buyers. Consumers get what they want & feel good about experiences
Costs
Most things can be bought online
Dynamic pricing - Practice of changing prices for products & services in real time in response to supply & demand conditions (makes things cheaper online than in-person)
Showrooming - Practice of consumers visiting stores to physically examine products before purchasing them online at lower price
Control
Online shoppers & buyers empowered consumers
Consumers use Internet/web-enabled tech to seek info, eval alternatives, make purchase decisions on own time, terms, conditions
Describing the Online Consumer
R shows that more than 80% of CAs 16+ are connected to Internet
94% of CAs use Internet to compare prices
60% go online to read or write reviews
Consumers are becoming smarter, increasingly informed, more demanding
Effects of social media on online consumers
SM recommendations increases chance of ppl buying products or services
50% of ppl under 35 followed recommendations of SM friends, compared to 17% who bought cause of celebrity endorsements
On average 7% of visitors to online store make a purchase. But if directed to store by SM site, this goes up by 71% - Ppl accessing online retailer via social are 10x more likely to buy something than other users
Becoming a follower of a brand on Tw or FB has positive impact on possibility of buying & recommending product or service
Research
Recommendations from personal acquaintances or opinions posted by consumers online are most trusted forms of advertising
90% of consumers trust recommendations from ppl they know
70% of trusted consumer opinions posted online
Influence of word of mouth on purchases till strong whether in-person or through SM
Consumers are starting to leverage cashback sites to save money while shopping
Using coupons & discount sites can allow ppl to plan purchases & receive rewards. Not every product on site qualify for ideal rewards but in fast-paced environ of consumer decision-making, taking a little bit of extra time to save money will serve consumers well in long run
What Online Consumers Buy
Allows customers to search for, eval, order products through Internet
Consumer Benefits
24-hour access
Ability to comparison-shop
In-home privacy
Studies
4 in 10 CAs aged 16+ use Internet to purchase products & services
CAs are foregoing loyalty to retailers if prices are cheaper online from non-CA retailers
Sales market will increase from $20 billion to $34 billion by 2018
Men were initially more likely than women to buy something online, but as the number of online households increased to more than 50%, profile changed to include all shoppers
Number of online retailers grew rapidly for several years but declined as many stand-alone, Internet-only businesses failed or consolidated
Bricks & Clicks
Using experience from both traditional & online-retail to create better value & experiences for customers
Online buying getting boost from comments that consumers are leaving on social media. These sites have influence on what consumers are buying online. R shows that FB & Tw are influences
When & Where Online Consumers Shop & Buy
Shopping & buying happen at different times in online marketspace than in traditional
Busiest shopping day is Monday
CAs are world's heaviest Internet users, spending on average 34 hours online monthly
CA not heaviest online consumers, with 1 in 5 they have never purchasing anything online
Retailer Usage of Mobile Channels
In-store shoppers can R products & prices on their handset using cameras, barcode scanners, QR cods, etc.
QR Code
Quick Response are similar to standard barcodes but have much more functionality
Can be used to send consumers who scan codes to places online & very effective marketing tools
Retailers can provide immediate incentives by knowing specific in-store location of shopper via GPS
Customer can make purchase in-store or over smartphone. Key is to provide methods to retain customer interest & loyalty via consistent shopping & branding exp across channels
Smartphones being used to engage consumers & help them make better shopping choices
Mobile commerce (m-commerce)
Retailers use mobile as way to enhance customer engagement & loyalty
It's pervasiveness of on devices that is leading growing number of retailers to explore what additional opportunities await in mobile space
Increasing number of shoppers arriving at stores with phones is threat to retailers
Happens when shoppers using phones to check prices at other stores
If ignored, customers will defect to competitors
Start developing mobile websites, with info on site that differentiates itself from competitors
Can be product reviews, warranty information, customer service, product knowledge, return policy
Websites not configured for mobile will lead to shopper frustration. Mobile websites, customers feel more comfortable about making purchase at store as opposed to going to another store for lower prices
Wholesaling
Merchant Wholesalers
Independently owned firms that take title to, that is they buy, the merchandise they handle
83% of firms engage in wholesaling activities as merchant wholesalers
Classifed as either full-service or limited-service wholesalers, depending on number of functions performaned
Full Service
General merchandise
[Full line]
Wholesalers that carry broad assortment of merchandise & perform all channel functions
Most prevalent in hardware, drug, clothing industries
Do not maintain much depth of assortment within specific product lines
Specialty merchandise
[Limited-line]
Wholesaler offer a relatively narrow range of products but have extensive assortment within the product lines carried
Perform all channel functions
Found in health foods, automotive parts, seafood industries
Limited-Service
Rack Jobbers
Furnish racks or shelves that display merchandise in retail stores & perform all channel functions
Sell on consignment to retailers, meaning they retain title to products displayed & bill retailers only for merchandise sold
Cash & Carry Wholesalers
Take title to merchandise but sell only to buyers who call on them, pay cash for merchandise, furnish own transportation for merchandise
Carry limited product assortment & don't make deliveries, extend credit or supply market info
Commonly deals with electric supplies, hardware products, groceries
Drop Shippers/Desk Jobbers
Wholesalers that own merchandise they sell but don't physically handle, stock, deliver it
Simply solicit orders from retailers & other wholesalers & have merchandise shipped directly from producer to buyer
Truck Jobbers
Small wholesalers that have small warehouse from which they stock their trucks for distribution to retailers
Usually handle limited assortments of gas-moving or perishable items that are sold for cash directly from trucks in ori packages
Agents & Brokers
Don't take title to merchandise & typically provide fewer channel functions
Make profit from commissions or fees paid for services, whereas merchant wholesalers make profit from sale of merchandise they bought & resold
Manufacturers' Agents
[Manufacturers' reps]
Work for several producers & carry non-competitive, complementary merchandise in exclusive territory
Act as producer's sales arm in a territory & principally responsible for transactional channel functions, primarily selling
Used extensively in automotive supply, footwear, fabricated steel industries
Selling Agents
Represent single producer & responsible for entire marketing function of that producer
Design promotional plans, set prices, determine distribution policies, make recommendations on product strategy
Used by small producers in textile, apparel, food, home furnishing industries
Brokers
Independent firms or individuals whose main function is to bring buyers & sellers together to make sales
Have no continuous relationship with buyer or seller but negotiate contract between two parties then move on to another taks
Used extensively in real estate industry
Unique Broker
Acts like manufacturer's agent is a food broker - Rep buyers & sellers in grocery industry
Food brokers differ from brokers cause act on behalf of producers on permanent basis & receive commission for their service
Manufacturer's Branches & Offices
Wholly owned extensions of producer that perform wholesaling activities
Producers assume wholesaling functions when:
There are no intermediaries to perform these activities
Customers are few in number
Geographically concentrated
Orders are large
Require significant attention
Want to control distribution of products
Manufacturer's branch office
Carries producer's inventory & performs functions of full-service wholesaler
Manufacturer's sales office
Doesn't carry inventory, typically performs only sales function & services as alternative to agents & brokers