MAR3231 Ex2 Ch6

destination retailers definition:

specific retail stores that are sought after (competitive advantage) because of some combination of price oriented and cost efficient, exclusive merchandise, and/or superior customer service

trade area analysis definition:

how far are people willing to drive to shop

trader joes facts:

• Started as a chain of convenience stores

• 80% of products are private label

destination retailers examples:

trader joes, IKEA, Bass Pro Shop, American Girl Doll, Kleinfield Bridal Shop

Destination retailers are becoming more popular due to:

the value placed on customer experience

the wheel of retailing definition:

a theory (put forth by Harvard professor Malcom McNair) to explain the institutional changes that take place when innovators (new retailers) enter the retail arena.

• describes how retailers capture market share and create brand value

The Wheel of Retailing is based on Four General Principles:

1. There are many price sensitive shoppers who will trade service, selection, and location for price.

   • I.e. they will always go with the cheapest option

2. Price sensitive shoppers are often not loyal and will switch for lower prices.

3. New institutions often have lower operating costs than existing institutions

4. Retailers move up the wheel to increase sales, broaden target market, and improve their image

Department stores are now facing increased competition from clothing retailers who offer fewer services but cheaper prices. This illustrates _____.

Wheel of Retail

The beginning of the wheel of retailing (when low-price institutions first appear) corresponds to which retail life cycle stage?

Introduction

In the lates 1990s, regional shopping malls were everywhere. People regularly flocked to their local mall to shop, socialize, and enjoy all that the mall had to offer. However, beginning in the early 2000s, regional malls began closing due to a spike in Ecommerce. This point in the early 2000s represents the beginning of the _____________ stage for regional shopping malls.

Decline

Sears is a great example of the wheel of retail in action:

• Sears was viewed similarly to the way we view Amazon today: a behemoth of a company that is too large to fail.

  • Sears went public in 1906, selling shares at $97.50. By today's market, that opening share price would be more than $2,500.

Lessons Learned/Advice for retail managers:

• Do not lose sight of your prime customer’s price consciousness

• Beware of the dangers in upgrading target markets– Old segment gets “sticker shock” and new segment does not accept retailer’s revised positioning

  • EX: Publix getting more expensive and customers shopping there less even after developing loyal customers.

• Employ customer benefit cost analysis to weigh the cost and benefits of specific service upgrades

• Use unbundled pricing to separately charge for select services such as delivery, installation etc.

Wheel of Retailing Stage 1:

• Low Price

• Low Status

• Low Margins

Wheel of Retailing Stage 2:

• High Price

• High Status

• High Margins

Wheel of Retailing Stage 3:

• Even Higher Price

• Even Higher Status

• Even Higher Margins

Wheel of Retailing Stage 4:

New Competitor Enters the Market with Low Price, Status, and Margins

scrambled merchandising definition:

a retail tactic in which a retailer broadens its assortment of products to include items that are generally outside the core focus. Goal is to create a one-stop-shop for the target customers

• EX: FSU shirts in a Tallahassee Publix, Food at a furniture store such as IKEA

if scrambled merchandising is done well:

• Creates a one stop shopping format

• Potential for carrying new “hot” items to increase store traffic

• Can increase store sales per square foot and same store sales

• Potential for high gross profit businesses

if scrambled merchandising is NOT done well:

• Creates a confusing shopping experience

• Damage retailer’s brand image

• Can lead to high inventory levels, resulting in excessive markdowns

example of poorly executed scrambled merchandising:

Areas like rural Georgia are more susceptible because there aren't a lot of other opportunities to shop there. These convenience stores are willing to take on the role of a dollar general (i.e. they're going to carry more products) because you don't see customers with the opportunities to shop at other places.

Retail life cycle definition:

retail institutions pass through identifiable life stages. The four stages are Introduction, Growth, Maturity, and Decline.

introduction stage:

• the initial stage of a retail business, when the business is being established and the first products/services are being sold

  • EX: Ultas being inside Targets

growth stage:

• if a retailer makes it to this stage (many don’t), the retailer begins to grow and expand, either through the addition of new products/services, or by opening new locations

  • EX: TheRealReal

maturity stage:

• in this stage, the retailer has reached a level of stability and is no longer experiencing rapid growth. The focus may shift to maintaining and improving the business, rather than seeking out new opportunities for growth.

  • EX: Home Depot, Lowes

decline stage:

• This is the final stage of the retail life cycle, when the business is no longer viable and may be closed or sold. 

  • EX: regional shopping malls

retail strategy mix definition:

areas in which retailers make decisions aimed at increasing the likelihood of purchase and the development of long-term relationships.

• EX: Tiffany & Co’s classic Tiffany blue packaging, Bass Pro Shops has their large aquariums, Bed Bath & Beyond has the always-available 20% off coupon.

Elements of a retail strategy mix may include:

• product mix

• place mix

• promotion mix

• people mix

From a customer’s POV, a strategy mix can include things like:

store location, operating procedures, goods/services offered, pricing tactics, store atmosphere, customer service, promotional methods

price mix definition:

the locations where the retailer operates, including physical stores, online channels, and distribution centers.

promotion mix definition:

the methods that the retailer uses to communicate with and attract customers, such as advertising, sales promotions, and public relations

people mix definition:

the employees and customer service representatives who interact with customers and help to shape the shopping experience

merchandise product mix definition:

the total number of product categories (product lines) that a retailer offers to its customers.

product line depth:

the number of items in a product line

Product Line Width/Breadth:

the number of different lines in a product mix

merchandising mix examples:

• Walmart has a wide merchandise mix (groceries, medicine, clothes, cd’s, etc)

• The Container store has a narrow merchandise mix (just containers)

Factory Outlet Retail Strategy:

• Originally, factory outlets were used for unsold merchandise

• Now most factory outlets carry products created for the factor outlet

  • Location: Discount shopping centers or outlet malls

  • Merchandise Mix: Moderate width and poor depth of assortment

  • Price: Very Low

  • Atmosphere & Service: Below Average

convenience stores retail strategy mix:

• Location: Neighborhoods (and near interstates) 

• Merchandise Mix: Medium width & low depth

• Price: Average to above average

• Atmosphere & Service: Average