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Chapter 4: Retailing
1
Chapter 14
Retailing
This chapter begins with the learning outcome summaries followed by a set of lesson plans for
instructors to use to deliver the content.
• Lecture (for large sections) on page 4
• Group Work (for smaller sections) on page 6
Review and Assignments begin on page 6
Review questions
Application questions
Application exercise
Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 17
Chapter 4: Retailing
2
Learning Outcomes
14-1 Explain the importance of the retailer within the channel and the U.S. economy
Retailing represents all the activities directly related to the sale of goods and services to the
14-2 List and understand the different types of retailers
Retail establishments can be classified according to the type of ownership, level of service,
14-3 Explain why nonstore retailing is on the rise and list the advantages of its different
forms
Nonstore retailing enables customers to shop without visiting a physical store location. It adds a
14-4 Discuss the different retail operations models and understand why they vary in
strategy and format
Retail formats are co-aligned with unique operating models that guide the decisions made by
Chapter 4: Retailing
3
14-5 Explain how retail marketing strategies are developed and executed
Retail managers develop marketing strategies based on the goals established by stakeholders and
14-6 Discuss how services retailing differs from goods retailing
The fastest-growing part of our economy is the service sector. Although distribution in the
14-7 Understand how retailers address product/service failures and discuss the
opportunities that service failures provide
No retailer can be everything to every customer, and by making strategic decisions related to
14-8 Summarize current trends related to customer data, analytics, and technology
Retailers are constantly innovating. They are always looking for new products and services (or
Key Terms
Atmosphere
Drugstore
Retail channel
omnification
Automatic vending
Factory outlet
Retailer
Back stock
Floor stock
Retailing mix
Chapter 4: Retailing
4
Beacon
Franchise
Retailing
Big data analytics
Franchisee
Self-service
technologies
(SST)
Brand cannibalization
Franchisor
Shop-at-home
television
network
Category killer
Full-line discount store
Shopper
analytics
Chain store
Gross margin
Shopper
marketing
Click-and-collect
Independent retailer
Specialty
discount store
Convenience store
Layout
Specialty store
Department store
Microtargeting
Supercenter
Destination store
Nonstore retailing
Supermarket
Direct mail
Off-price retailer
Telemarketing
Direct marketing (DM)
Online retailing (e-tailing)
Used goods
retailer
Direct retailing
Restaurant
Warehouse club
Discount store
Lesson Plan for Lecture
Brief Outline and Suggested PowerPoint Slides
Learning Outcomes and Topics
PowerPoint Slides
LO1 Explain the importance of the retailer within
the channel and the U.S. economy
14-1 The Importance of Retailing
1. Retailing
2. Learning Outcomes
3. Learning Outcomes (continued)
4. Importance of Retailing
5. Retailing
LO2 List and understand the different types of
retailers
14-2 Types of Retailers and Retail Operations
6. Types of Retailers and Retail
Operations
7. Classifications of Retail Operations
8. Classification of Retail Operations
Based on Ownership Arrangement
9. Classification of Retail Operations
Based on Level of Service and
Chapter 4: Retailing
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Learning Outcomes and Topics
PowerPoint Slides
Product Assortment
10. Exhibit 14.1: Types of Stores and
Their Characteristics
11. Types of In-Store Retailers
Operations
12. Categories of Discount Stores
LO3 Explain why nonstore retailing is on the rise
and list the advantages of its different forms
14-3 The Rise of Nonstore Retailing
13. Rise of Nonstore Retailing
14. Nonstore Retailing
LO4 Discuss the different retail operations
models and understand why they vary in
strategy and format
14-4 Retail Operations Models
15. Retail Operations Models
16. Retail Operating Models
LO5 Explain how retail marketing strategies are
developed and executed
14-5 Executing a Retail Marketing Strategy
17. Executing a Retail Marketing
Strategy
18. Retail Marketing Strategy
19. Defining a Target Market
20. Exhibit 14.2: The Retailing Mix
21. Retail Promotion Strategy
22. Place
23. Presentation of a Retail Store
24. Personnel
LO6 Discuss how services retailing differs from
goods retailing
14-6 Retailing Decisions for Services
25. Retailing Decisions for Services
26. Retailing Decisions for Services
LO7 Understand how retailers address
product/service failures and discuss the
opportunities that service failures provide
14-7 Addressing Retail Product/Service
Failures
27. Addressing Retail Product/Service
Failures
28. Service Recovery
Chapter 4: Retailing
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Learning Outcomes and Topics
PowerPoint Slides
LO8 Summarize current trends related to
customer data, analytics, and technology
14-8 Retailer and Retail Customer Trends and
Advancements
29. Retailer and Retail Customer Trends
and Advancements
30. Emerging Technologies Used by
Retailers
31. Shopper Marketing and Shopper
Analytics
32. Developments in Retail Management
33. Key Terms
34. Key Terms
35. Summary
36. Summary
Suggested Homework
• The end of this chapter contains assignments for the JCPenney case.
• This chapter’s online study tools include flashcards, visual summaries, practice quizzes,
and other resources that can be assigned or used as the basis for longer investigations into
marketing.
Lesson Plan for Group Work
Application question 1 lends itself well to group work. For this activity, divide the class into
small groups of four or five people. Students from each group should read the question and then
use their textbooks, or any work that was completed previously, to perform the exercise. Then
each group should discuss or present its work to the class.
Class Activity—Retail Location
Objective: This exercise should aid students in understanding the multitude of factors that must
be considered when selecting a site for a store.
Tell the class that the object of this exercise is to find the optimal location for a new retail
establishment. Select a store type that appeals to college students—a bar, bike shop, pizzeria, etc.
Chapter 4: Retailing
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Divide the class into “location consultant groups” with you, the instructor, being the client. If the
class is extremely large, you may want to have two or three types of retail stores. Each store
should have three to four groups looking for a location. The students need to find an actual
available location to recommend. The report to the client (instructor) should include description,
square footage, leasing terms or price, and a justification for the selection of the site. The group
offering the site that is selected by the client receives bonus points.
Review and Assignments for Chapter 14
Review Questions
1. Discuss the possible marketing implications of the recent trend toward supercenters,
which combine a supermarket and a full-line discount store.
Supercenters have been created to meet the needs of today’s customers for convenience,
variety, and service. Customers can truly have one-stop shopping for both food and
2. Explain the function of warehouse clubs. Why are they classified as both wholesalers
and retailers?
Although students’ answers will vary, they should address some of these points.
3. What advantages does franchising provide to franchisers as well as franchisees?
Benefits for franchisees include the use of a known name, product, and/or business
Chapter 4: Retailing
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© 2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Benefits for franchisers include the receipt of the franchise fee and royalty fees, and growth
into new areas.
Application Questions
1. In order to fully appreciate the role retailing plays in the U.S. economy, it may be
helpful to review a selection of press articles related to the retailing industry. Search
for articles pertaining to retailing. Read a selection of articles, and report your
findings to the class.
Student answers will vary depending on the articles read. You may wish to have students
2. Form a team with three classmates to identify the different retail stores in your city
where pet supplies are sold. Team members should split-up and visit all the different
retailing outlets for pet supplies. Prepare a report describing the differences in
brands and products sold at each of the retailing formats and the differences in store
characteristics and service levels. For example, look at brands that are sold via mass
merchandisers versus independent specialty stores or other venues. Suggest why
different products and brands are distributed through different types of stores.
Answers will vary widely based on the variety of locations visited by students.
3. Go to the Gift Center at online wine retailer wine.com’s website
http://www.wine.com/. How does this site help shoppers select gifts?
Student answers may differ depending on their experience with the product category.
4. How much does the most powerful computer with the fastest modem, most memory,
largest monitor, biggest hard drive, and all the available peripherals cost at
http://www.dell.com? Then visit a store like Best Buy or Circuit City and price a
comparable computer. How can you explain any price differences between the two
retail operations? Explain any differences in features that you encountered. What
conclusions can you draw from your research?
Chapter 4: Retailing
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© 2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
elements. Students may also mention interactivity as an element that creates atmosphere
online. For example, blogging areas, message boards, live interaction, ability to post
content, and so forth can all contribute to an online store’s atmosphere.
Application Exercise
After reading the chapter, you can see that differences in retailing are the result of strategy. To
better understand the relationship between strategic retailing factors and consumer perceptions,
you can conduct a simple observation exercise. First, pick a product to shop for, and then
identify two stores where you have never shopped as places to look for your product. The two
stores must be different types of retailers. For example, you can shop for a new HDTV at Best
Buy (category leader) and at local electronics stores (specialty retailers). Once you have
identified what you are looking for and where you’re going to look, visit each store and record
your observations of specific strategic retailing factors.
Purpose: To have students think intentionally about differences in retailing establishments by
comparing two stores at which they have never shopped.
Setting It Up: Because this involves excursions, you may wish to set this up as a paired
exercise. Alternatively, you can pick the product for which the students will shop and direct
teams to research the item, each at a different type of retailer. Teams can share results, and the
class can see the comparisons and draw conclusions as a whole.
Activities
1. Go through each store and make careful observations on the following:
• Location: Where is each store? How congested is the area of town where each store
is located? What influence does the neighborhood have on your impression of the
store? Would you travel to this store under normal circumstances? Write a detailed
paragraph on the location of each store.
• Exterior atmosphere: How convenient is parking? Is parking adequate? How are
other issues concerning parking (cleanliness and size of the lot, size of spaces, well-
lit, etc.)? What kinds of stores are around the store you are visiting? Do you think
being located next to them increases traffic at your store? Are direct competitors
nearby? Is the building modern or historic? Is it attractive, clean, and appealing? Is
the entrance inviting to shoppers?
• Interior atmosphere: Compare the following attributes at each store: aisle width;
lighting; number of customers; noise (background music, loudspeakers, etc.); store
layout; signage; accessibility of the cashier; number of products available (depth and
width of assortment); ability to inspect the product before purchase; quality of the
fixtures (shelves, lights, etc.); availability of salespeople and their knowledge about
Chapter 4: Retailing
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the product; willingness of salespeople to help.
• Product: Is your product available? If not, is there a satisfactory substitute? What is
your perception of the quality of goods offered? Why do you think as you do?
• Price: What is the price of the product/brand at this store? Is the price prominently
displayed? How do the prices at the two stores compare? How does the price
compare to your expectations?
2. From which of these two stores would you actually purchase the item? Why, specifically?
List the factors that played a role in your decision. Which factor is most important to you?
If you would not purchase the item at either store, why not?
3. What are the three most important differences you observed between the stores?
4. Using the results of your research, write a short paper that outlines your observations.
Conclude your paper with your answers to questions 2 and 3.
This exercise was inspired by the following Great Idea in Teaching Marketing:
Amy R. Hubbert, University of Nebraska at Omaha
Discovery of Strategic Retailing Factors
The purpose of this assignment is to give students in the Principles of Marketing course an
opportunity discover for themselves the influence of strategic retailing factors (e.g., location,
atmospherics, etc.) on consumer perceptions. The project involves individual, detailed
observation at two very different types of retail outlets and a four- to five-page summary of the
findings. An in-class activity enables groups of students to compare and contrast their findings
and reinforces the understanding of strategic retailing factors.
Each student selects an item categorized as a “shopping product” for which to shop. Students
describe the product attributes desired as specifically as possible. If it is a branded product, the
brand being sought is named. The intent of this aspect of the assignment is to ensure students
start out with a clear conception of the specific product for which they are shopping. Students
then select and compare two retailers who offer this product.
Two issues are critical in the selection of specific stores. First, retailing factors will be most
salient if two very different stores are compared. Therefore, each student chooses two types of
retailers (specialty store, department store, discount store, or category killer) and visits one store
of each type. Second, it is imperative that students choose stores where they have never shopped.
Retailing factors will be most apparent, and observed most objectively, in unfamiliar stores.
Chapter 4: Retailing
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Each student visits the two stores he or she selects and records observations of specific strategic
retailing factors at each store. The following guidelines encourage attention to detail and provide
an outline for the discussion:
A. Location Factors
What is the type of location (traditional business district, community shopping center, etc.)? How
congested is this part of town in general? What influence does the neighborhood have on your
impression of the store? Would you travel to this store under normal circumstances to shop for
your product?
B. Exterior Atmospherics
a. How convenient is it to get into the parking lot from the street? For example, do you
have to drive by and make a U-tum or can you turn in at a stoplight?
b. How adequate is the parking? What other parking issues do you notice? For example, is
there a parking lot? Are the slots wide or too narrow? Is it a short or long walk to the
entrance? Are there are other cars in the lot (if not, how does that make you feel)? How
adequate is visibility? Describe the pedestrian traffic in the parking lot and to the store.
c. Do you think nearby stores increase the number of customers to the store you are
visiting, or is it more likely to be the other way around? Are there direct competitors
nearby?
d. Does the building have a modern appearance? Does it have an attractive appearance? Is
the entrance inviting to potential shoppers? Explain.
C. Interior Atmospherics
a. Aesthetics: Discuss aisle width in general and in comparison to the other store. Note the
lighting. Is it too bright or too dim? Is it used to emphasize the merchandise? How
crowded does the store seem? Too deserted? Too crowded? Describe any odors you
detect. What is the noise level? Is there background music? If yes, note the volume, tape
quality, and appropriateness of the music.
b. Layout: How prominent is the department in which your product is located? How long
did it take you to find the department/product? Are more/better signs needed? How large
is this department compared to others in the store? How accessible is a cashier’s station?
Is someone immediately available to take payment? If not, how long would you have to
wait?
c. Display: How deep and wide are the product lines compared to others in the store, the
other store, and your own expectations? What sources of information/promotion about
Chapter 4: Retailing
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your product are available? Are you able to inspect the very unit you would purchase, or
is it sealed in its package, located in a warehouse, etc.? What are your perceptions of the
quality of the fixtures, shelving, etc.?
d. Personnel: Are salespeople available to help? If yes, by what clues are the sales staffs
recognizable? Is a salesperson willing and/or able to help you right away? Is the
salesperson knowledgeable about the products and services offered?
D. Product
Is your product available at the store? Is there a satisfactory substitute? What are your
perceptions of the quality level of the goods offered? Specifically identify the factors on which
you base these perceptions.
E. Price
What is the price of the product/brand you would purchase from this store? Is the price
prominently displayed? How does the price compare to the other store’s price? How does the
price compare to your expectations?
Students conclude their papers with reflections on the following questions:
a. From which of these two stores would you actually purchase the item? Why, specifically?
List the factors that play a role in your decision. Which factor is most important to you? If
you would not purchase the item at either store, why not?
b. What are the three most important differences you observed between the stores?
On the due date, an in-class activity offers the opportunity for students to share and compare
their findings. Small groups of four to five students are formed. Each group member names their
product and identifies the types of retailers and specific stores visited. Groups identify and
discuss key differences among types of retailers. Based on their discussion, each group identifies
the three most important benefits offered by each type of retailer and lists these on the
chalkboard. The activity concludes with a class-wide discussion of strategic retailing factors and
how these relate to retail positioning and customer satisfaction.
Case Assignment: Kroger Co.
In 1883, Barney Kroger used his life savings (a total of $372) to open a grocery store on Pearl
Street in downtown Cincinnati, Ohio. He ran his retail business with a simple principle: Be
particular. Never sell anything you would not want yourself. Over 130 years later, Kroger is one
Chapter 4: Retailing
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of the world’s largest retailers with more than 2,700 stores falling under two dozen company
banners.
Over its century of growth, mergers have been key to Kroger’s continued success. In 1983,
Kroger merged with Dillion Companies Inc. in Kansas to become a coast-to-coast operator of
food, drug, and convenience stories. In 1999, the company merged with Fred Meyer, Inc. to
create a supermarket chain with the widest variety of formats and the broadest geographic
coverage in the food retailing industry.
In 2014, Kroger completed its merger with Harris Teeter, a regional chain in the Mid-
Atlantic region and the District of Columbia. In addition to acquiring more than 200 stores,
Kroger gained the prototype for Harris Teeter’s online grocery service.
Kroger took this prototype and ran with it, and in late 2014, the company began testing
ClickList, their option for online grocery shopping. The concept took off, with working moms
calling it a “game changer” due to the fast service.
Kroger ClickList customers shop online for their groceries, choosing from a catalog
featuring 40,000+ items, including fresh meat and produce. After confirming the order, shoppers
reserve a pickup date and time. At the designated time, they pick up their order by parking in one
of the designated ClickList spots. Store attendants personally select the groceries prior to the
designated time and at pickup, they load the groceries into the customer’s vehicle. Customers can
pay without even turning off their engine. The service costs $4.95 for regular orders and $7.99
for expedited ones.
ClickList transactions must be paid for with a credit or debit card. Government benefits
(including WIC and SNAP) cannot be accepted. Cash, checks, and gift cards also cannot be
accepted for ClickList payments, but patrons can use their KrogerPlus Card to receive
purchasing rewards.
By 2016, Kroger had expanded ClickList services to Nashville, Tennessee; Atlanta,
Georgia; Louisville, Kentucky; Cincinnati, Ohio; Murfreesboro, Tennessee; central Virginia; and
central Indiana locations. Kroger had to make physical changes to stores offering ClickList, such
as adding refrigerators and freezers, designating a pickup area in the parking lot, and adding
exterior doors to allow attendants the most direct access to pickup areas. They also had to add
employees to fill the orders and manage grocery pickup and payment.
Chapter 4: Retailing
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© 2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
While Kroger may have been the first to enter the click-and-collect grocery business, they
are unlikely to be the last. Walmart has been testing its own click-and-collect service for
groceries. And Amazon may be taking steps to enter the into the drive-up grocery game. (The
grocery market is worth $800 billion.)
Amazon already offers AmazonFresh, home delivery of more than 500,000 items, including
fresh groceries for same-day or next-day delivery. AmazonFresh is only available in Seattle,
areas of northern and southern California, New York City, Philadelphia, Baltimore, and
Stamford, Connecticut. AmazonFresh costs $299 for an annual membership. AmazonPrimeNow
is also expanding into new markets with two-hour home delivery of select products ordered from
Amazon.com.
Amazon has made no official statement about their future plans in the grocery business.
Only time will tell how successful Kroger’s ClickList will actually become and what competition
it will face in the future.
Sources: “ClickList,” Kroger, accessed October 20, 2016,
https://www.kroger.com/onlineshopping/signin?redirectUrl=https%3A%2F%2Fwww.kroger.co
m%2Fstorecatalog%2Fservlet%2FOnlineShoppingStoreSetup; H. Peterson, “Kroger has a game-
changing new grocery service, and moms are freaking out about it,” Business Insider, February
17, 2016, accessed October 20, 2016, http://www.businessinsider.com/moms-are-going-crazy-
for-krogers-new-clicklist-service-2016-2; “History of Kroger,” Kroger, accessed October 20,
2016, http://www.thekrogerco.com/about-kroger/history-of-kroger; “Will Amazon mimic
Kroger’s ClickList?,” Cincinnati.com, August 26, 2016, accessed October 20, 2016,
http://www.cincinnati.com/story/money/2016/08/25/amazon-may-planning-click-and-collect-
grocery/89366546/.
TRUE/FALSE
1. Kroger Co. is one of the world’s largest grocery retailers.
2. Kroger locations are franchises.
Chapter 4: Retailing
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3. Kroger locations are considered convenience stores.
4. Kroger’s ClickList is an example of nonstore retailing.
5. Picking and packing groceries is easier for Kroger employees than customers because they
have access to the floor stock and the back stock.
MULTIPLE CHOICE
1. Kroger Co. is what type of retailer?
a. department store
b. specialty store
c. supermarket
d. warehouse club
2. Which of the following is NOT one of the Ps of the retailing mix?
a. presentation
b. performance
Chapter 4: Retailing
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c. personnel
d. price
3. By adding the ClickList service, Kroger made adjustments to all of the following elements of
their retailing mix EXCEPT:
a. personnel
b. product
c. presentation
d. place
4. Customers are commenting that the most important improvement to Kroger’s customer service
by the addition of ClickList is the:
a. minimization of wait times.
b. management of service capacity.
c. improvement to service delivery.
d. establishment of channel-wide network coherence.
5. Kroger can use __________ gathered from ClickList orders to determine which products they
should keep more or less of in stock.
a. beacons
b. shopper marketing
c. click-and-collect
d. shopper analytics
Great Ideas for Teaching Chapter 14
James S. Cleveland, Sage College of Albany
Discussion Board Topics to Encourage Participation
Chapter 4: Retailing
18
Discussion board questions provided to students to encourage them to engage in thinking and
writing about the content of the Principles of Marketing course usually take the form of a
provocative statement to which students are asked to respond. An example of this would be “All
PR is good PR.”
Discussion topics such as this one are abstract and often require that the instructor provide an
initial reply to show students what is expected of them in their own replies. For students with
limited work experience, this approach may be quite appropriate. For adult students with
extensive experience as employees and consumers, however, the abstract nature of such topics
can be frustrating.
Below are a series of discussion board questions to use with experienced, adult students. These
questions are designed to encourage them to use their experiences as employees and consumers
as doorways to better understand the course material, and to make their own responses more
interesting to themselves and to the other students in the class who will read and comment on
them.
Each question has three parts.
1. First, there is a sentence or two from the students’ textbook introducing the topic. By using
the text author’s own words, students are able to locate relevant material in the text easily,
the text content is reinforced, and confusion resulting from the use of variant terms or
expressions is minimized.
2. Second, there is a reference to text pages the students should review before proceeding.
Since the goal of the exercise is for students to apply the course content to their own
experiences, reviewing the content first is important.
3. Third, there is a request for the students to think about or remember some specific situation
in their experiences to which they can apply the text material, and a question or questions
for them to address in their replies.
Here are additional such discussion board questions developed for Chapter 14 of MKTG11. Each
is written to fit the same text cited above but could easily be rewritten and revised to fit another
text.
Series A
1. Organizations have three options for distribution intensity: intensive distribution, selective
distribution, or exclusive distribution.
2. Review the information about levels of distribution intensity from section 14-2 in your
text.
3. Then select a product you recently purchased. At what level of distribution intensity is this
Chapter 4: Retailing
19
product distributed? Why do you think this might be the case? Explain your answer.
Series B
1. Because consumers demand convenience, nonstore retailing is currently growing faster
than in-store retailing.
2. Review the information about nonstore retailing from section 14-5 in your text.
3. Then consider five recent purchases. Have any of them been through nonstore retailing? If
so, list the type of nonstore retailing that was used, and explain why you chose that method
over traditional stores. If not, classify the type of stores you purchased from and why you
chose those over nonstore retailing options.
David M. Blanchette, Rhode Island College
Franchise Expo
This exercise has several purposes. Directly, students have the opportunity to internalize and
apply concepts related to obtaining and operating a retail franchise. Secondarily, students can
practice their negotiation and management skills. Ideally the exercise is done in groups of two to
four, but it can be easily done with individuals as well. The time devoted to the exercise is very
flexible, and it can be done in as little as one hour or as long as one semester.
After presenting information to the class about franchising, students are separated into groups.
Some groups are “franchisors,” and some are potential “franchisees.” The premise is that there
will be a franchise expo in which franchisors sell franchises to prospective franchisees.
(Normally, the number of potential franchisees will exceed that of franchisors to encourage
competition and negotiation, but this is up to the instructor.)
Franchisors initially need to determine the franchise they have for sale. A common restriction
here is that the franchise cost must be relatively low, as the franchisee groups are recent college
graduates and of relatively modest means. Franchisors can invent franchises or sell existing
franchises (if preferred, the instructor may assign or give available franchises for sale).
Depending on the time devoted, franchisors can research these franchises to learn about their
characteristics, or simply make up characteristics that would be logical for the franchise.
Specifically, franchisors need to determine the offer to potential franchisees as well as the
selection criteria they will use to determine which franchisee offers to accept. Time permitting,
franchisors may develop (or have the option of developing) an offering circular, earnings
representations, applications, etc., consistent with the Franchise Rule. Their task, then, is to
prepare materials and standards to be used to attract and retain desirable franchisees.
