MKTG Ch. 17: Retailing and Multichannel Marketing

Retailing
– defined as the set of business activities that add value to products and services sold to consumers for their personal or family use
Factos for choosing retail partners
(1) Choosing retailing partners
(2) Identifying types of retailers
(3) Developing a retail strategy
(4) Managing a multichannel strategy
(1) Choosing retail partners
– manufacturers assess how likely it is for certain retailers to carry their products
– consider where their target customers expect to find the products
– the type and availability of the product and the image the manufacturer wishes to portray will determine how many retailers within a geographic region will carry the products
(2) identifying types of retailers
– manufacturers identify the types of retailers that would be appropriate to carry their products
(3) Developing a retail strategy
– manufacturers and retailers develop their strategy by implementing the four Ps
(4) Managing a multichannel strategy
Multichannel strategy: involves selling in more than one channel (e.g. store, catalog, and internet)

– consists of examining the circumstances in which sellers may prefer to adopt a particular strategy

Channel structure
– The level of difficulty a manufacturer experiences in getting retailers to purchase its products is determined by the degree to which the channel is vertically integrated; the degree to which the manufacturer has a strong brand or is otherwise desirable in the market; and the relative power of the manufacturer and retailer
Customer Expectations
– Manufacturers need to know where their target market customers expect to find their products and those of their competitors
Channel Member Characteristics
– the larger and more sophisticated the channel member, the less likely that it will use supply chain intermediaries
Distribution Intensity
– the number of channel members to use at each level of the marketing channel

Divided into three levels:
(1) Intensive distribution
(2) Exclusive distribution
(3) Selective distribution

(1) Intensive distribution (Distribution intensity)
– designed to place products in as many outlets as possible
(2) Exclusive distribution (Distribution intensity)
– granting exclusive geographic territories to one or very few retail customers so no other retailers in the territory can sell a particular brand
– benefits manufacturers because it assures them that the most appropriate retailers represent their products
(3) Selective distribution (Distribution intensity)
– relies on a few selected retail customers in a territory to sell products
– helps a seller maintain a particular image and control the flow of merchandise into an area
– attractive to shopping goods: products for which consumers are willing to spend time comparing alternatives, such as most apparel items, home items, branded hardware and tools, and consumer electronics
Food retailers
(1) Supermarket
(2) Supercenters
(3) Warehouse Clubs
(4) Convenience stores
(1) Supermarket (Food Retailers)
a self-service retail food store offering groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise
– carry about 30,000 individual items or stock keeping units (SKUs)
(2) Supercenters (Food Retailers)
– large stores (185,000 square feet) that combine a supermarket with a full-line discount store
– Walmart is leader
– Provide a one-stop shopping convenience for customers
(3) Warehouse Clubs (Food Retailers)
– large retailers (100,000 – 150,000 square feet) that offer a limited and irregular assortment of food and general merchandise, little service, and low prices to the general public and small businesses
– Costco, Sam’s Club (Walmart), and BJ’s Wholesale Club
– Potential outlet for upscale image firms that overstocked merchandise or over estimated demand
(4) Convenience stores
– provide a limited variety and assortment of merchandise at a convenient location in 3,000 – 5,000 square foot stores with speedy checkout
General Merchandise Retailers
(1) Department Stores
(2) Full-line discount stores
(3) Specialty stores
(4) Drugstores
(5) Category Specialists
(6) Extreme Value Retailers
(7) Off-price retailers
(1) Department Stores (General Merchandise Retailers)
– retailers that carry a broad variety and deep assortment, offer customer services, and organize their stores into distinct departments for displaying merchandise
– include Sear’s, Macy’s, Kohl’s, JCPenney, and Nordstrom
(2) Full-line discount stores (General Merchandise Retailers)
– retailers that offer a broad variety of merchandise, limited service, and low prices
– include Walmart, Target, and Kmart
– higher end products not expected in Full-line discount stores
(3) Specialty stores (General Merchandise Retailers)
– concentrate on a limited number of complementary merchandise categories targeted toward very specific market segments by offering deep but narrow assortments and sales associate expertise
(4) Drugstores (General Merchandise Retailers)
– specialty stores that concentrate on pharmaceuticals and health and personal grooming merchandise
– include CVS, Walgreens, and Rite Aid
(5) Category Specialists (General Merchandise Retailers)
– big box retailers or category killers that offer a narrow but deep assortment of merchandise
– most use self-service approach
– Ex: Staples
(6) Extreme Value Retailers (General Merchandise Retailers)
– small, full-line discount stores that offer a limited merchandise assortment at very low prices
– Ex: Dollar stores
– Target low income consumers
(7) Off-price retailers (General Merchandise Retailers)
– offer an inconsistent assortment of brand name merchandise at a significant discount from the manufacturer’s suggested retail price (MSRP)
– Ex: TJMaxx, Marshalls, Winners, HomeGoods, AJWright, HomeSense, Ross, Burlington, Big Lots, Overstock, Bluefly

– most merchandise is bought opportunistically from manufacturers or other retailers with excess inventory at the end of the season; therefore, customers cannot be confident that the same merchandise or even type of merchandise will be available each time they visit a store or website

Services Retailers
– firms that primarily sell services rather than merchandise
Developing a retail strategy using *the four P’s*
(1) Product
(2) Price
(3) Place
(4) Promotion
(1) Product
exclusive co-brand: a brand that is developed by a national brand vendor, often in conjunction with a retailers, and is sold exclusively by the retailer

Advantage – available at only one retailer and provide name recognition similar to that of a national brand

Disadvantage from manufacturer’s perspective – can be sold by only one retailer, and therefore the manufacturer’s market is limited
Disadvantage from retailer’s perspective – retailer has to share its profits with the national brand manufacturer, whereas with a private-label brand, it does not

(2) Price
– helps determine the value of both the merchandise and the service
– price must always be aligned with the other elements of a retailer’s strategy: product, promotion, and place
(3) Promotion
– good promotion, both within the retail environments and the media, can mean the difference between flat sales and a growing consumer base

Mobile Commerce (M-commerce): product and service purchases through mobile devices

(4) Place
– convenience is a key ingredient to success
Benefits of Stores for Consumers
(1) Browsing
(2) Touching and feeling products
(3) personal Service
(4) Cash and credit payment
(5) Entertainment and social experience
(6) Immediate gratification
(7) Risk reduction
(1) Browsing (Benefits of stores for consumers)
– consumers go to a store to see what is available before making their final decision about what to buy
(2) Touching and feeling products (Benefits of stores for consumers)
– opportunity for customers to use all five of their senses (touch, smell, taste, vision, and hearing) to examine products
(3) Personal Service (Benefits of stores for consumers)
– sales associates have the capability to provide meaningful, personalized information
(4) Cash and credit payment (Benefits of stores for consumers)
– stores are the only channel that accepts cash payments
(5) Entertainment and social experience (Benefits of stores for consumers)
– in store shopping can be a stimulating experience for some, providing a break in their daily routine and enabling them to interact with friends
(6) Immediate Gratification (Benefits of stores for consumers)
– allow customers to get the merchandise immediately after paying for it
(7) Risk reduction (Benefits of stores for consumers)
– when customers purchase merchandise in stores, the physical presence of the store reduces their perceived risk of buying and increases their confidence that any problem with the merchandise will be corrected
Benefits of the Internet and Multichannel Marketing
(1) Deeper and Broader Selection
(2) Personalization
(3) Expand Market Presence
(1) Deeper and Broader Selection (Benefits of the Internet and Multichannel Marketing)
– retailer can offer customers a vast number of alternatives without crowding their aisles or increasing their square footage
(2) Personalization (Benefits of the Internet and Multichannel Marketing)
Personalized customer service – Online chat with customer service representatives

Personalized offering – retailers can offer customers personalized offerings based on customer behavior – website makes suggestions to consumer

(3) Expand Market Presence (Benefits of the Internet and Multichannel Marketing)
– retailers can expand their market without having to build new stores or incur the high cost of additional catalogs
Effective Multichannel Retailing
(1) Integrated CRM
(2) Brand Image
(3) Pricing
(4) Supply Chain
(1) Integrated CRM
– Effective multichannel operations require an integrated CRM system with a centralized customer data warehouse that houses a complete history of each customer’s interaction with the retailer, regardless of whether sale occurred in a store, on the internet, or on the phone
(2) Brand Image
– Retailers need to provide a consistent brand image across all channels
(3) Pricing
– Customers expect pricing consistency for the same SKU across channels (excluding shipping charges and sales tax)