Chapter 13 PDF

Preview

Summary

Chapter Notes...

Description

 



Retailing is defined as the set of business activities that add value to products and services sold to consumers for their personal or family use. No longer do manufacturers rule many marketing channels, as they once did. Instead the largest retailers in the world—dictate to their suppliers what should be made, how it should be configured, when it should be delivered, and, to some extent, what it should cost an omnichannel strategy in which they sell in more than one channel (e.g., store, catalogue, kiosk, and Internet)

LO1 CHOOSING RETAIL PARTNERS Channel Structure  The level of difficulty a manufacturer has in getting retailers to purchase its products is determined by the degree to which the channel is vertically integrated Customer Expectations  it is important to know from which manufacturers its customers want to buy. Manufacturers, in contrast, need to know where their target market customers expect to find their products and those of their competitors. Customers generally expect to find certain products at some stores but not at others. Channel Member Characteristics  The larger and more sophisticated the channel member, the less likely it is to use supply chain intermediaries  Independent grocery store might buy merchandise from a wholesaler; but Walmart, the world’s largest grocer, buys only directly from the manufacturer  Larger firms often find that by performing the channel functions themselves, they can gain more control, be more efficient, and save money LO2 IDENTIFYING TYPES OF RETAILERS Food Retailers  

The characteristics of the three major categories of food retailers Category

Description

Examples

Conventio nal supermark et

Offers groceries, meat, Sobeys is common in Central and produce with limited Canada and on the East Coast. sales of non-food items, such as health and beauty aids and general merchandise, in a selfservice format.

Big-box food retailer

Comes in three types: supercentres, hypermarkets, and warehouse clubs. Larger than conventional supermarkets, they carry both food and non-food items.

Supercentres and warehouse clubs are popular in Canada, whereas hypermarkets tend to flourish in Europe and South America. Hypermarkets (Carrefour) and warehouse clubs (Costco) generally carry a greater percentage of food.

Convenien Provides a limited 7-Eleven ce store number of items at convenient locations in small stores with speedy checkout. General Merchandise Retailers  Discount Stores o A discount store offers a broad variety of merchandise, limited service, and low prices. Walmart and Giant Tiger dominate the discount store industry in Canada.  Specialty Stores o Specialty stores concentrate on a limited number of complementary merchandise categories in relatively small stores. These stores tailor their retail strategy toward very specific market segments by offering deep but narrow assortments and sales associate expertise o Example: Sephora, France’s leading perfume and cosmetic chain—a division of the luxury goods conglomerate LVMH  Category Specialists o A category specialist offers a narrow variety but a deep assortment of merchandise. Example, Best Buy (consumer electronics) or Rona (home improvement). o Category specialists offer such an extensive assortment in a particular category, they can so overwhelm the category that other retailers have difficulty competing; in these cases, the specialist is frequently called a category killer  Department Stores o Department stores are retailers that carry many different types of merchandise (broad variety) and lots of items within each type (deep assortment), offer some customer services, and are organized into separate departments to display their merchandise. They often resemble a collection of specialty shops. o The largest remaining department store chain in Canada is the Hudson’s Bay Company. o Department stores have lost market share to specialty stores, discount stores, and category specialists in recent years. They seem to have gotten stuck in the middle, between those retailers that provide a better value at lower prices and those that offer more complete and fashionable assortments and better customer service, according to consumer perceptions.  Drugstores o A drugstore is a specialty store that concentrates on health and personal grooming merchandise, though pharmaceuticals often represent more than 60 percent of its sales. Example, Shoppers Drug Mart face a major challenge because of the low margins they earn on prescription drugs; health insurance companies and government programs pay most of the cost of





many prescriptions, and the health insurance companies negotiate substantially lower prices with drugstores.  attempt to make up for their lost profits on prescriptions by concentrating their efforts on nonpharmaceutical product Off-Price Retailers o An off-price retailer—such as Winners, Marshalls—offers an inconsistent assortment of merchandise at relatively low prices. They buy from manufacturers or other retailers with excess inventory or at the end of a season for one-quarter to one-fifth the original wholesale price o An extreme-value retailer is a general merchandise discount store found in a lower-income urban or rural area are a subset of off-price retailers and one of the fastest growing retailing segments. They are much smaller than traditional discount stores, usually less than 840 square meters. Example, Dollarama Services Retailers o Services retailers, or firms that primarily sell services rather than merchandise, are a large and growing part of the retail industry. due to increased competition, these organizations are adopting retailing principles to attract customers and satisfy their needs. o The aging population will increase demand for health care services. Younger people are also spending more time and money on health and fitness. Busy parents in two-income families are willing to pay to have their homes cleaned, lawns maintained, clothes washed and pressed, and meals prepared so they can spend more time with their families

LO3 DEVELOPING A RETAIL STRATEGY 

Once the target market is selected, retailers must develop the retail mix: product (merchandise assortment), pricing, promotion, place, personnel, and presentation (store design and display) strategies to reach and serve these consumers. These elements must be closely coordinated so that they portray a consistent and clear positioning such that consumers know what type of customers the retailer is targeting and how it wants to serve them.

Product (Merchandise Assortment)  Providing the right mix of merchandise and services that satisfies the needs of the target market is one of retailers’ most fundamental activities  Manufacturers don’t like to store inventory because their factories and warehouses are typically not available to customers  Consumers don’t want to store more than they need because it takes up too much space  Retailers thus provide value to both manufacturers and customers by performing the storage function Price  Price helps define the value of both the merchandise and the service, and the general price range of a particular store helps define its image  Banana Republic and Old Navy are owned by The Gap, their images could not be more different. Banana Republic prices its merchandise to attract young professionals, whereas Old Navy aims to satisfy trendy, price-sensitive consumers. Thus, when a manufacturer





considers which of these stores is most appropriate for its new line of scarves and accessories, it must keep customers’ perceived images of these retailers’ price–quality relationship in mind Manufacturers must consider at what price they will sell the product to retailers so that both the manufacturer and the retailer can make a reasonable profit. At the same time, they are concerned about what the customer is willing to pay Consumers of all ages, nearly all income groups, and practically all segments have undertaken the “shift to value.” Costco were once known for monthly stock-up trips. However, now they are apart of weekly shopping routines

Promotion 

Retailers and manufacturers know that good promotion can mean the difference between flat sales and a growing consumer base. Advertising in traditional media such as newspapers, magazines, and television continues to be important to get customers into the stores.  Electronic communications are being used increasingly for promotions. In the store, retailers use displays and signs, placed at the point of purchase or in strategic areas such as the ends of aisles (known as end caps), to inform customers and stimulate purchases of the featured products.  A coordinated effort between the manufacturer and retailer helps guarantee that the customer receives a cohesive message. To an extent in which they both can maintain their consistent images  Cooperative (co-op) advertising o An agreement between a manufacturer and retailer in which the manufacturer agrees to defray some advertising costs.  Store credit cards and gift cards are more subtle forms of promotion that also facilitate shopping. Retailers also might offer pricing promotions—such as coupons, rebates, instore or online discounts—to attract consumers and stimulate sales.  Augmented reality is being used by more and more retailers to attract customers to their stores. For example, retailers leveraged the Pokémon Go app when it first launched Presentation (Store Design and Display)  retailers are devoting more resources to their overall retail environment as a means to promote and showcase what the store has to offer. Their displays of merchandise, both in the store and in windows, have become an important form of promotion.  Tesla’s stores are set up with interactive displays. Customers can configure their own vehicle using a touchscreen and then view their design  The Wheel of Retailing

o

o

o

In the Wheel of Retailing concept, as stores add services and improvements, expand the mix of merchandise carried, and upgrade their facilities, costs are generally added to the day-to-day operations, which results in higher prices. This change opens up opportunities for new lean, mean entrants at the beginning of the wheel. In some Canadian McDonald’s outlets, tasteless plastic is being replaced by appealing colours and natural materials, fireplaces, flat-screen TVs, leather chairs, and modern lighting fixtures.

Personnel 





As a part of the Dairy Farmers of Canada’s “Cooking With Cheese” campaign, brand ambassadors were sent to stores armed with handheld scanners. They could scan items in shoppers’ carts on the spot and then print out cheese-based recipes and dinner suggestions based on the ingredients Retail associates provide customers with information about product characteristics and availability. They can also facilitate the sale of products or services that consumers perceive as complicated, risky, or expensive, such as an air conditioning unit or a diamond ring Today, the most successful retailers provide more value to their best customers. The knowledge retailers gain from their store personnel, the Internet browsing and buying activities of customers, and the data they collect on customer shopping habits can be used in customer relationship management (CRM). o Using this information, retailers may modify product, price, and/or promotion in an attempt to increase their share of wallet—the percentage of the customer’s purchases made from that particular retailer

Place   

convenience is a key ingredient to success old cliché claims, the three most important things in retailing are “location, location, location" In pursuit of better locations, retailers are experimenting with different options to reach their target markets. Example, Shoppers Drug Mart open for 24 hours

LO4 MANAGING OMNICHANNEL OPTIONS  omnichannel strategy to create a consistent experience across all channels Store Channel 

Browsing o













Shoppers often have only a general sense of what they want but don’t know the specific item they want. They go to a store to see what is available before they decide what to buy or they surf the web and look through catalogues for ideas Touching and Feeling Products o Perhaps the greatest benefit offered by stores is the opportunity for customers to use all five of their senses when examining products Personal Service o Sales associates have the capability to provide meaningful, personalized information. Sales people can be particularly helpful when purchasing a complicated product Cash and Credit Payment o Stores are the only channel that accepts cash payments. Some customers prefer to pay with cash because it is easy. Some customers prefer to use their credit or debit card in person rather than send payment information electronically. Entertainment and Social Interaction o In-store shopping can be a stimulating experience for some people, providing a break in their daily routine and enabling them to interact with friends Instant Gratification o Stores have the advantage of allowing customers to get the merchandise immediately after they buy it Risk Reduction o When customers purchase merchandise in physical stores, it reduces their perceived risk of buying and increases their confidence that any problems with the merchandise will be corrected.

Benefits of Internet and Omnichannel Retailing Internet Channel  Deeper and Broader Selection o Vast number of alternatives available to consumers. Consumers can easily “visit” and select merchandise from a broader array of retailers. o Websites typically offer deeper assortments of merchandise than are available in stores or catalogues and it enables them to satisfy consumer











demand for less popular styles, colours, or sizes and still keep their overall inventory costs low More Information to Evaluate Merchandise o Home Depot walks its online customers through the steps of installation and repair projects, thereby giving do-it-yourselfers confidence prior to tackling home improvement tasks Personalization o The most significant potential benefit of the Internet channel is its ability to personalize promotions and services for each customer economically. Personalized Customer Service o Traditional Internet channel approaches for responding to customer questions often do not provide the timely information customers are seeking. To improve customer service from an electronic channel, many firms offer live, online chats. o online retailers use metrics such as the amount of time the visitor has spent on the site or number of visits to determine when to invite customers to chat Personalized Offering o The interactive nature provides an opportunity for retailers to personalize their offerings for each of their customers by using cookies that provide identifying information. Online retailers are able to present to customers is recommendations of complementary merchandise Expanded Market Presence o With the Internet’s low entry costs and constantly improving search engines and shopping bots, smaller niche sources for hard-to-find products, collectibles, and hobbies can expand their trade area from a few city blocks to the world o Consumers who shop at omnichannel retailers typically buy more than those who shop in only one retail channel

Kiosk Channel  





 

By blending stores with Internet-enabled kiosks, retailers can dramatically expand the assortment offered to their customers Retailers using a kiosk channel may simply provide store associates with access to the company website so that they can more easily help customers find product information or place orders. Broader Selection o Customers with the ability to shop in a store and look up products at a kiosk generally get access to an expanded assortment of products Access to Items Online That Are Out of Stock in Store o Retailers using in-store kiosks can often save a sale if an item is out of stock or if their location does not carry a broad product assortment. Access to Wish Lists and Gift Registries o Customers buying gifts can check gift registries Access to Loyalty Program Information o Being able to check the status of a loyalty program and determine whether points are available to be used is a benefit to consumers. Also allows

retailers to overcome resource constraints by freeing up staff to provide sales assistance to other customer Catalogue Channel  Catalogues offer the convenience of looking at merchandise and placing an order 24/7. However, once a catalogue is printed, it cannot be updated with price changes and new merchandise  Convenience o The information in a catalogue is easily accessible for a long period of time. The development of magalogs—catalogues with magazine-type editorial content—enhances consumers’ desire to keep catalogues readily available  Information o Catalogues have information about the products and how they can be used. IKEA catalogue is integrated with an augmented reality app that let customers see how furniture would look in their homes  Safety o Security in malls and shopping areas is becoming an important concern for many shoppers, particularly the elderly. o Non-store retail formats offer the advantage of enabling customers to view merchandise and place orders from their homes Effective Omnichannel Retailing  Consumers want a seamless experience when interacting with omnichannel retailers. They want to be recognized by a retailer  However, providing this seamless experience for customers is not easy for retailers. Because each of the channels is somewhat different, a challenge for omnichannel retailers is the degree to which they should or are able to integrate the operations of the channels. To determine how much integration is best, each retailer must address issues such as integrated CRM, brand image, pricing, and the supply chain.  Adding an electronic channel is particularly attractive to firms with strong brand names but limited locations and distribution  Integrated CRM o Effective omnichannel operations require an integrated customer relationship management (CRM) system with a centralized data warehouse that houses a complete history of each customer’s interaction with the retailer. It allows retailers to efficiently handle complaints, expedite returns, target future promotions, and provide a seamless experience  Brand Image o Retailers need to provide a consistent brand image across all channels o Mountain Equipment Co-Op (MEC) reinforces its image of selling highquality, environmentally friendly sports equipment in its stores, catalogues, and website  Pricing o Customers expect pricing consistency for the same SKU across channels. However, sometimes retailers need to adjust their pricing strategy because of the competition they face in different channels o Omnichannel retailers may have difficulties sustaining these regional price differences when customers can easily check prices on the Internet



Supply Chain o

Omnichannel retailers struggle to provide an integrated shopping experience across all their channels because unique skills and resources are needed to manage each channel. Retail distribution centres (DCs) supporting a store channel are designed to ship many cartons of merchandise to stores....