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
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
ultimate consumer for personal, nonbusiness use. When individuals shop for groceries, hair
styling, clothes, books, and many other products and services, they are doing business with
retailers. Retailing affects all people directly or indirectly. Trends and innovations relating to
customer data, social media, and alternative forms of shopping are constantly developing, and
retailers have no choice but to react.
14-2 List and understand the different types of retailers
Retail establishments can be classified according to the type of ownership, level of service,
product assortment, and price. These variables can be combined in several ways to create various
retail operating models. Retail ownership takes one of three forms: independent, chain store, or a
franchise outlet. The service levels that retailers provide range from full service to self-service.
Retailers can also be categorized by the width and depth of their product lines. Price is the fourth
way to position retail stores. Many stores fall into the basic types of retailers, but some
companies have begun to experiment with alternative formats.
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
level of convenience for customers who wish to shop from their current locations. Due to broader
changes in culture and society, nonstore retailing is currently growing faster than in-store
retailing. The major forms of nonstore retailing are automatic vending, direct retailing, direct
marketing, and Internet retailing.
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
their managers. Each operating model can be summarized as a set of guiding principles. Today,
most retail stores remain operationally and tactically similar to those that have been in business
for hundreds of years, with one or more physical locations that the customer must visit in order
to purchase a stocked product, and with strategies in place to attract customers to visit.
14-5 Explain how retail marketing strategies are developed and executed
Retail managers develop marketing strategies based on the goals established by stakeholders and
the overall strategic plans developed by company leadership. Strategic retailing goals typically
focus on increasing total sales, reducing costs of goods sold, and improving financial ratios such
as return on assets or equity. The first and foremost task in developing a retail strategy is to
define the target market. Retail operation entails combining the elements of the retailing mix to
come up with a single retailing method to attract that target market. The retailing mix consists of
six Ps: the four Ps of the marketing mix (product, promotion, place, and price) plus presentation
and personnel. The first element in the retailing mix is the product offering, also called the
product assortment or merchandise mix. Retail promotion strategy includes advertising, public
relations and publicity, and sales promotion. The retailing axiom “location, location, location”
has long emphasized the importance of place to the retail mix. Another important element in the
retailing mix is price. Retailing’s ultimate goal is to sell products to consumers, and the right
price is critical to ensure sales. The presentation of a retail store helps determine the store’s
image and positions the retail store in consumers’ minds. People are a unique aspect of retailing.
Most retail sales involve a customer-salesperson relationship.
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
service sector is difficult to visualize, the same skills, techniques, and strategies used to manage
inventory can also be used to manage service inventory, such as hospital beds, bank accounts, or
airline seats. Because service industries are so customer oriented, service quality is a priority.
14-7 Understand how retailers address product/service failures and discuss the
opportunities that service failures provide
In spite of retailers’ best intentions and efforts to satisfy each and every customer, all retailers
inevitably disappoint a subset of their customers. No retailer can be everything to every
customer, and by making strategic decisions related to targeting, segmentation, and the retailing
mix, retailers implicitly decide which customers will be delighted and which will probably leave
the store unsatisfied. The best retailers have plans in place not only to recover from inevitable
lapses in service but perhaps even to benefit from them.
14-8 Summarize current trends related to customer data, analytics, and technology
Though retailing has been around for thousands of years, it continues to change every day.
Retailers are constantly innovating. They are always looking for new products and services (or
ways to offer them) that will attract new customers or inspire current ones to buy in greater
quantities or more frequently. Big data analytics, shopper marketing, mobile technology, and
social media are at the front of this innovation. Some retailers have turned to channel
omnification, while others have embraced click-and-collect.
Key Terms
Atmosphere Drugstore Retail channel
omnification
Automatic vending Factory outlet
Back stock Floor stock Retailing mix
Beacon Franchise
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
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.
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.