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, McGraw-Hill/Irwin

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CHAPTER

RETAILING

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AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 1. Identify retailers in terms of the utilities they provide. 2. Explain the alternative ways to classify retail outlets.

3. Describe the many methods of nonstore retailing.

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AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 4. Classify retailers in terms of the retail positioning matrix. 5. Develop retailing mix strategies over the life cycle of a retail store.

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THE VALUE OF RETAILING Retailing

Consumer Utilities Offered by Retailing

The Global Impact of Retailing

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FIGURE 17-1 Which company best represents which utilities?

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FIGURE 17-2 Retail sales ($billions), by type of business

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Printemps
What is the global economic impact of retailing?

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Concept Check

1. When Polo makes shirts cut to a customers exact preferences, what utility is provided? A: form utility

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Concept Check

2. Two measures of the impact of retailing in the global economy are total sales ________ and number of employees _________________.

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CLASSIFYING RETAIL OUTLETS Form of Ownership

Independent Retailer
Corporate Chain

Contractual Systems
Business-Format Franchises Product-Distribution Franchises

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FIGURE 17-3 The top five franchises in the United States

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CLASSIFYING RETAIL OUTLETS Level of Service

Self-Service
Limited Service

Full-Service

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CLASSIFYING RETAIL OUTLETS Type of Merchandise Line

Depth of Product Line
Specialty Outlets

Category Killers

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FIGURE 17-4 Breadth versus depth of merchandise lines

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CLASSIFYING RETAIL OUTLETS Merchandise Line

Breadth of Product Line
General Merchandise Stores

Scrambled Merchandising
Hypermarket Supercenter Intertype Competition

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FIGURE 17-5 Differences between hypermarkets and supercenters

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Concept Check

1. Centralized decision making and purchasing are an advantage of chain ownership. ____

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Concept Check

2. What are some examples of new forms of self-service retailers? A: Delta Airlines and the Hiltons self-service kiosk for customer check-in as well as others.

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Concept Check

3. Would a shop for big mens clothes carrying pants in sizes 40 to 60 have a broad or deep product line?

A: deep product line

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NONSTORE RETAILING Automatic Vending

Direct Mail and Catalogs

Television Home Shopping

Online Retailing
Telemarketing
Do-Not-Call Registry

Direct Selling
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FIGURE 17-6 Forms of nonstore retailing

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Concept Check

1. Successful catalog retailers often send _______ catalogs to _____ markets specialty niche identified in their databases.

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Concept Check

2. How are retailers increasing consumer interest and involvement in online retailing? A: Retailers have improved the online retailing experience by adding experiential or interactive activities to their websites through virtual models or the ability to customize a purchase.
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Concept Check

3. Where are direct selling retail sales growing? Why? A: Direct-selling retailers are expanding into other global markets due to a lack of effective distribution channels and consumer knowledge about products and brands.

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RETAILING STRATEGY Positioning a Retail Store

Retail Positioning Matrix
Breadth of Product Line

Value Added

Keys to Positioning

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FIGURE 17-7 Elements of a retailing strategy

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FIGURE 17-8 Retail positioning matrix

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FIGURE 17-A Implications of the retailing positioning matrix

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RETAILING STRATEGY Retailing Mix

Retail Pricing
Markup
Original Markup
Markup on Selling Price Markup on Cost

Maintained Markup
Gross Margin

Markdown
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RETAILING STRATEGY Retailing Mix

Retail Pricing
Everyday Low Pricing

Everyday Fair Pricing

Prices as Benchmarks or Signposts

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RETAILING STRATEGY Retailing Mix

Retail Pricing
Shrinkage

Off-Price Retailing
Warehouse Club Outlet Store

Single-Price or Extreme Value Retailers

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ETHICS AND SOCIAL RESPONSIBILITY ALERT Who Takes the Five-Finger Discount? Youll Be Surprised!

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RETAILING STRATEGY Retailing Mix

Store Location
Central Business District

Regional Shopping Center

Anchor Stores

Community Shopping Center Strip Location Power Center

Carts, Kiosks, and Wall Units

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RETAILING STRATEGY Retailing Mix

Retail Communication
Image

Atmosphere or Ambiance

Merchandise
Category Management Consumer Marketing at Retail (CMAR)

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Concept Check

1. What are the two dimensions of the retail positioning matrix? A: breadth of product line and value added

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Concept Check

2. How does original markup differ from maintained markup? A: The original markup is the difference between retailer cost and initial selling price whereas maintained markup is the difference between the final selling price and retailer cost.

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Concept Check

3. A huge shopping strip with multiple power anchor stores is a _____ center.

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THE CHANGING NATURE OF RETAILING

The Wheel of Retailing

The Retail Life Cycle

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FIGURE 17-9 The wheel of retailing

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FIGURE 17-10 The retail life cycle

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FUTURE CHANGES IN RETAILING Multichannel Retailing

Multichannel Retailers

The Impact of Technology

Changing Shopping Behavior

Vertical Malls

Co-Branding

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Concept Check

1. According to the wheel of retailing, when a new retail form appears, how would you characterize its image?

A: A low-status, low-margin, low-price outlet.

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Concept Check

2. Market share is usually fought out maturity before the _______ stage of the retail life cycle.

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Concept Check

3. What is a smart card? A: A smart card looks like a credit card but stores information about bank accounts and customer purchases in an embedded computer chip.

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GOING ONLINE
CONSUMERS CAN NOW SHOP WITH THEIR BOT!

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Going Online

1. Visit the mysimon.com and shopping.com websites. Find the best prices for one of the following products: (1) Wilson tennis racket; (2) Sony TV; and (3) Guess jeans.
mySimon Shopping

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Going Online

2. How did the two bots differ? What range of prices did you obtain? What shipping and handling charges would apply to each purchase? Why are different recommendation made by the agents?
mySimon Shopping

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SUPPLEMENTAL LECTURE NOTE 17-1

HOW THE SEARS-KMART MERGER CHANGES RETAILING

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SUPPLEMENTAL LECTURE NOTE 17-2

FRANCHISING OFFERS OPPORTUNITIES AND FINANCIAL, LEGAL, AND CULTURAL CHALLENGES
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SUPPLEMENTAL LECTURE NOTE 17-3

LILLIAN VERNON: A CATALOG SUCCESS STORY

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VIDEO CASE 17
MALL OF AMERICA: SHOPPING AND A WHOLE LOT MORE

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VIDEO CASE 17
Mall of America

1. Why has Mall of America been such a marketing success so far?

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VIDEO CASE 17
Mall of America

2. What (a) retail and (b) consumer trends have occurred since Mall of America was opened in 1992 that it should consider when making future plans?

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VIDEO CASE 17
Mall of America

3. (a) What criteria should Mall of America use in adding new facilities to its complex? (b) Evaluate (i) retail stores, (ii) entertainment offerings, and (iii) hotels on these criteria.

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VIDEO CASE 17
Mall of America

4. What specific marketing actions would you propose that Mall of America managers take to ensure its continuing success in attracting visitors (a) from the local metropolitan area and (b) from outside of it?
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APPENDIX D CASE D-17

NORDSTROM, INC.: RETAILING IN A COMPETITIVE ENVIRONMENT
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APPENDIX D CASE D-17

Nordstrom

1. How would Nordstrom be classified as a retail outlet in terms of form of ownership, level of service, and merchandise line?

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APPENDIX D CASE D-17

Nordstrom

2. What type of retail position does Nordstrom occupy? Who do you see as its primary competitors, given this position?

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APPENDIX D CASE D-17

Nordstrom

3. How do you reconcile Nordstroms growth and success with the fact that department stores as a category are in the maturity stage of the retail life cycle? What implications are there for Nordstrom given the maturity of the category as well as the wheel of retailing concept?
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Retailing

Retailing includes all activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use.

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Form of Ownership

Form of ownership distinguishes retail outlets based on whether individuals, corporate chains, or contractual systems own the outlet.

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Level of Service

Level of service is the degree of service provided to the customer and include self-, limited-, and full-service retailers.

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Merchandise Line

A merchandise line describes how many different types of products a store carries and in what assortment.

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Depth of Product Line

Depth of product line means that the store carries a large assortment of each item.

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Breadth of Product Line

Breadth of product line refers to the variety of different items a store carries.

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Scrambled Merchandising

Scrambled merchandising involves offering several unrelated product lines in a single store.

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Hypermarket

A hypermarket is a large store (more than 200,000 square feet) that offers consumers everything in a single outlet, eliminating the need to shop at more than one location.

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Intertype Competition

Intertype competition means there is competition between very dissimilar types of retail outlets.

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Telemarketing

Telemarketing involves using the telephone to interact with and sell directly to consumers.

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Retail Positioning Matrix

The retail positioning matrix is a matrix that positions retail outlets on two dimensions: breadth of product line and value added.

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Retailing Mix

The retailing mix includes the activities related to managing the store and the merchandise in the store, which includes retail pricing, store location, retail communication, and merchandise.

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Shrinkage

Shrinkage is the breakage and theft of merchandise by customers and employees.

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Off-Price Retailing

Off-price retailing involves selling brand-name merchandise at lower than regular prices.

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Central Business District

The central business district is the oldest retail setting, usually located in the communitys downtown area.

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Regional Shopping Centers

Regional shopping centers consists of 50 to 150 stores that typically attract customers who live or work within a 5- to 10-mile range, often containing two or three anchor stores.

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Community Shopping Center

A community shopping center consists of a retail location that typically has one primary store (usually a department store branch) and often 20 to 40 smaller outlets, serving a population of consumers who are within a 10- to 20-minute drive.

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Strip Location

A strip location consists of a cluster of stores to serve people who are within a 5- to 10-minute drive.

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Power Center

A power center consists of a huge shopping strip with multiple anchor (or national) stores.

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Category Management

Category management is an approach to managing the assortment of merchandise in which a manager is assigned the responsibility for selecting all products that consumers in a market segment might view as substitutes for each other, with the objective of maximizing sales and profits in the category.

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Wheel of Retailing

The wheel of retailing is a concept that describes how new forms of retail outlets enter the market.

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Retail Life Cycle

The retail life cycle is the process of growth and decline that retail outlets, like products, experience, which consists of the early growth, accelerated development, maturity, and decline stages.

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Multichannel Retailers

Multichannel retailers utilize and integrate a combination of traditional store formats and nonstore formats such as catalogs, television, and online retailing.

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