Chapter 15 ♦ Retailing 15-1
CHAPTER 15 Retailing
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their shopping
characteristics.
✓ Application Exercise
struggling, Nordstrom thrived, posting a 10.8 percent sales increase
from the prior year.
Students research a single product at two different types of retailers
at which they have never shopped.
USING THIS MANUAL
Chapter fifteen includes seven learning outcomes that help students become more familiar with retailing. The chapter
✓ Global Perspectives
Walmart works around strict Indian regulations to develop a presence
in the large country.
15-2 Chapter 15 ♦ Retailing
LEARNING OUTCOMES
1 Discuss the importance of retailing in the U.S. economy
Retailing plays a vital role in the U.S. economy for two main reasons. First, retail businesses contribute to our high
2 Explain the dimensions by which retailers can be classified
3 Describe the major types of retail operations
The major types of retail stores are department stores, specialty retailers, supermarkets, drugstores, convenience stores,
discount stores, and restaurants. Department stores carry a wide assortment of shopping and specialty goods, are
organized into relatively independent departments, and offset higher prices by emphasizing customer service and décor.
4 Discuss non-store retailing techniques
Non-store retailing, which is shopping outside a store setting, has four major categories. Automatic vending uses
machines to offer products for sale. In direct retailing, the sales transaction occurs in a home setting, typically through
5 Define franchising and describe its two basic forms
6 List the major tasks involved in developing a retail marketing strategy
Retail management begins with defining the target market, typically on the basis of demographic, geographic, or
Chapter 15 ♦ Retailing 15-3
7 Describe new developments in retailing
Three major trends are evident in retailing today. First, adding interactivity to the retail environment is one of the most
popular strategies in retailing in recent years. Small retailers as well as national chains are using interactivity to involve
CHAPTER OUTLINE
1 Discuss the importance of retailing in the U.S. economy
Review Questions 1.1, 1.2
PowerPoint 15-5, 15-6:
The Role of Retailing
I. The Role of Retailing
Retailing is all activities directly related to the sale of goods and services to the
ultimate consumer for personal, non-business use.
2 Explain the dimensions by which retailers can be classified
PowerPoint 15-9:
Classification of Retail
Operations
Review Question 2.1
PowerPoint 15-10:
Classification of
Ownership
PowerPoint 15-11:
Level of Service
II. Classification of Retail Operations
Retailers can be differentiated on the basis of ownership, level of service, product
assortment, and price.
A. Ownership
Retailers can be broadly classified by form of ownership: independent, part
of a chain, or a franchise outlet.
1. Independent retailers are owned by a single person or partnership.
They are not operated as part of a larger retail institution.
B. Level of Service
Various services provided by retailers can be classified along a continuum
Types of Stores and Their
Characteristics
C. Product Assortment
Another basis for positioning or classifying stores is by the breadth and
depth of their product line.
have a wide array of products with limited depth.
D. Price
Some stores, such as department stores, typically charge full price, while
3 Describe the major types of retail operations
PowerPoint 15-15:
Major Types of Retail
Operations
III. Major Types of Retail Operations
Traditionally, there have been several distinct types of retail stores, each offering
a different product assortment, service, and price level. In a recent trend,
retailers are experimenting with alternative formats that make it harder to classify
them.
A. Department Stores
1. With several departments under one roof, a department store carries
a wide variety of shopping and specialty goods, including apparel,
cosmetics, housewares, electronics, and sometimes furniture.
B. Specialty Stores
1. A specialty store is not only a type of store but also a method of retail
operations that specializes in a given type of merchandise.
Chapter 15 ♦ Retailing 15-5
C. Supermarkets
1. Americans spend approximately 10 percent of their disposable income
in supermarkets, which are large, departmentalized, self-service
retailers that specialize in foodstuffs and some nonfood items.
2. Supermarkets have experienced declining sales in recent years. One
4. To stand out in an increasingly competitive market, many supermarket
chains are tailoring marketing strategies to appeal to specific consumer
segments.
5. Loyalty marketing programs reward loyal customers with discounts or
gifts.
PowerPoint 15-16:
Categories of Discount
Stores
D. Drugstores
1. Drugstores stock pharmacy – related products and services as their
main draw.
E. Convenience Stores
Convenience stores carry a limited line of high-turnover convenience
F. Discount Stores
Discount stores are retail stores that are able to compete on the basis of low
prices, high turnover, and high volume.
1. Full-line discounters carry a broad assortment of nationally branded
15-6 Chapter 15 ♦ Retailing
PowerPoint 15-17:
PowerPoint 15-19:
Specialty Discount Stores
Review Questions 3.2, 3.3
hard goods (broader than a department store) and offer customers few
services. Very similar to department stores in many respects, their
sheer size in sales volume, promotion budgets, and number of stores
sets them apart.
Mass merchandising is the retailing strategy whereby retailers use
2. Specialty discount stores are single-line stores offering merchandise
such as sporting goods, electronics, auto parts, office supplies, or toys.
a. These stores offer a nearly complete selection of one line of
3. Warehouse membership clubs offer a limited selection of
brand-name appliances, household items, and groceries – usually in
bulk – on a cash-and-carry basis to members only.
4. Off-price discount retailers sell at prices that are 25 percent or more
below traditional department store prices because they pay cash for
their stock, and usually don’t ask for return privileges.
a. These retailers purchase goods at cost or less from manufacturers’
G. Restaurants
Restaurants straddle the line between a retailing and service establishment.
Tangible products are food and drink. Service elements are food
preparation and food service.
Chapter 15 ♦ Retailing 15-7
4 Discuss nonstore retailing techniques
PowerPoint 15-22:
Nonstore Retailing
PowerPoint 15-23:
Direct Retailing
PowerPoint 15-24:
Types of Direct Marketing
IV. Nonstore Retailing
Nonstore retailing refers to shopping without visiting a store and is currently
growing faster than in-store shopping because of the consumer demand for
convenience.
A. Automatic Vending is a form of nonstore retailing that uses automated
machines to sell products.
B. Direct retailing is the selling of products by representatives who work
door–to-door, office–to-office, or at home parties. The trend is toward party
plans rather than cold door–to-door canvassing.
C. Direct marketing, sometimes called direct-response marketing, describes
a variety of techniques such as telephone selling, direct mail, catalogs, and
newspaper, television, or radio ads that invite the shopper to buy from their
homes.
1. Direct Mail can be the most or least efficient retailing method,
depending on the quality of the mailing list and the effectiveness of
3. Telemarketing is the use of the telephone to sell directly to
consumers. It consists of outbound sales calls, usually unsolicited, and
inbound calls.
a. Outbound telemarketing is an attractive direct-marketing
Review Questions 4.1 and
4.2
4. Electronic Retailing
a. Shop-At–Home Networks are a specialized form of direct
response marketing. The shop-at-home cable television industry
15-8 Chapter 15 ♦ Retailing
5. Mobile Retailing/M-commerce
a. Involves consumers using wireless mobile devices to connect to
the Internet to shop.
5 Define franchising and describe its two basic forms
PowerPoint 15-27:
Basic Forms of
Franchising
PowerPoint 15-28:
Franchising
V. Franchising
A. A franchise is a continuing relationship in which a franchiser grants to a
franchisee the business rights to operate or to sell a product.
D. There are two basic forms of franchises:
1. In product and trade name franchising, a dealer agrees to sell certain
products provided by a manufacturer or a wholesaler.
6 List the major tasks involved in developing a retail
marketing strategy
PowerPoint 15-32:
Retail Marketing Strategy
VI. Retail Marketing Strategy
Chapter 15 ♦ Retailing 15-9
PowerPoint 15-34:
Choosing the Retailing
PowerPoint 15-36:
Choosing the Retailing
Mix
PowerPoint 15-37:
Retail Promotion Strategy
PowerPoint 15-38:
The Proper Location
2. The targeting process begins with market segmentation. The markets
are often defined by demographics, geographies, and lifestyles or
psychographics.
B. Choosing the Retailing Mix
1. The product offering is the mix of products offered to the consumer
by the retailer.
a. The retailer must determine what to sell, a decision based on
research of the target market, past sales, fashion trends, customer
2. Promotion strategy includes advertising, public relations, publicity,
and sales promotion.
a. The goal of the retailer’s promotional strategy is to help position
the store in consumers’ minds.
3. Proper location is extremely important in retailing.
a. A location is a large and long-term commitment of resources.
b. Location selection may be based on economic, political, or
geographic factors.
c. Specific site selection is based on neighborhood socioeconomic
characteristics, traffic flows, land costs, zoning regulations, and
public transportation.
15–10 Chapter 15 ♦ Retailing
income shoppers with an aversion for “the mall”.
PowerPoint 15-41:
Retail Prices
PowerPoint 15-42, 15-43:
Presentation of the Retail
Store
Review Question 6.2
PowerPoint 15-44:
Personnel and Customer
Service
4. Retail prices are the fourth element in the retail mix.
a. Price is also a large part of a retail store’s positioning strategy
5. The presentation of a store determines the store’s image.
a. The predominant aspect is the store’s atmosphere, the store’s
mood or feeling as established by the physical layout, decor, and
surroundings.
b. The main determinants of a store’s atmosphere are:
• Employee type and density
6. Personnel and customer service are prominent aspects of retailing.
a. Sales personnel provide their customers with the amount of
service prescribed in the retail strategy of the store.
7 Describe new developments in retailing
VII. New Developments in Retailing
Recent trends in retailing are interactivity and m-commerce.
PowerPoint 15-48:
New Developments in
A. Interactivity
B. Pop-Up Shops
1. Pop-up shops are temporary retail establishments that allow companies
Chapter 15 ♦ Retailing 15–11
is a smaller store within a larger store.
KEY TERMS
atmosphere
drugstore
pop-up shop
automatic vending
factory outlet
product offering
buyer
franchises
retailing
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
1.1 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 divide into small groups
1.2 Keep a shopping journal that details all the retail establishments you visit in a week, how long you spent in
each store, how much money you spent, and the reason for your visit. At the end of the week, review your
journal and analyze your relationship to retail. As a class, compile your results to get a picture of shopping
habits and consumer behavior.
2.1 Form a team of three classmates to identify the different retail stores in your city where pet supplies are sold.
Include non-store forms of retailing, such as catalogs, the Internet, or the local veterinarian. Team members
should divide 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, which brands are sold via mass merchandisers, independent
specialty stores, or other venue? Suggest why different products and brands are distributed through
different types of stores.
3.1 Discuss the possible marketing implications of the recent trend toward supercenters, which combine a
supermarket and a full-line discount store.
category killers
franchisee
retailing mix
chain store
franchisor
scrambled merchandising
convenience store
full-line discount store
specialty discount store
department store
gross margin
specialty store
mass merchandising
supermarket
direct retailing
off-price retailer
warehouse membership clubs
discount store
online retailing
Supercenters have been created to meet the needs of today’s customers for convenience, variety, and service.
3.2 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:
3.3 Would you be interested in buying luxury items, like expensive jewelry, at a warehouse club? Wal-Mart
offered a $350,000 diamond solitaire ring during a recent Christmas shopping season. If you could afford
such a ring, would you consider buying it at Wal-Mart? Why or why not?
4.1 Go to the Gift Center at online wine retailer Web site at www.wine.com. How does this site help shoppers
select gifts?
4.2 Identify how much the most powerful computer with the fastest modem, most memory, largest monitor,
biggest hard drive and all the available peripherals costs at www.dell.com. Then visit a store like Best Buy or
CompUSA 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?
4.3 Most catalog companies also offer online shopping. Visit the Web site of one of your favorite catalogs to
see if you can buy online. If so, surf the online catalog for a few minutes. Then compare the two retailing
methods (paper and Internet) for prices, products, and so forth. Which do you prefer—the paper
catalog or online shopping? Why?
4.4 To what can you attribute the renewed interest in the party format of retailing? Go to the library
research direct sales parties. Write a paragraph describing the target market for these parties and the
shifts in the external environment that contribute to their resurgent popularity.
Students’ answers will vary.
5.1 What advantages does franchising provide to franchisors as well as franchisees?
Benefits for franchisees include the use of a known name, product, and/or business methods. In addition the
Chapter 15 ♦ Retailing 15–13
5.2 Curves is the world’s largest fitness franchise and the fastest-growing franchise of any kind. What do
you need to do to become a Curves franchisee? Visit the Web page www.curves.com to find out. Does
anything surprise you?
6.1 Identify a successful retail business in your community. What marketing strategies have led to its success?
Although students’ answers will vary, the following is a basic model of a student response:
6.2 How can a company create an atmosphere on its Web site? Visit the pages of some of your favorite
retailers to see if they have been able to re-create the store atmosphere on the Internet.
Students’ answers will vary. Many will cite elements of design as the ability to create atmosphere: color, layout,
7.1 Make a list of stores that actively incorporate some kind of interactivity or entertainment into their
retailing strategy. Now, make a list of stores that do not, such as office supply stores. Compare your two
lists. Select a company from your second list and draft a strategy to help it become more interactive.
7.2 What kind of retailers or brands do you think would benefit from a pop–up shop? Why?
Students’ answers will vary. Some examples would be similar to the Italian coffee maker, Illy, who opened a pop-up
APPLICATION EXERCISE