Retailing and wholesaling consist of many organizations bringing goods and services from the point of production to the point of use. In this chapter, we examined the nature and importance of retailing, the major types of retailers, the decisions retailers make, and the future of retailing. We then examined these same topics for wholesalers.
Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailers play an important role in connecting brands to consumers in the final phases of the buying process. Shopper marketing involves focusing the entire marketing process on turning shoppers into buyers as they approach the point of sale. These days, shopper marketing and the “point of purchase” go well beyond in-store buying. Today’s buyers are omni-channel consumers who work across multiple channels as they shop. Thus, influencing consumers’ buying decisions calls for omni-channel retailing, creating a seamless cross-channel buying experience that integrates in-store, online, and mobile shopping.
Retail stores come in all shapes and sizes, and new retail types keep emerging. Store retailers can be classified by the amount of service they provide (self-service, limited service, or full service), product line sold (specialty stores, department stores, supermarkets, convenience stores, superstores, and service businesses), and relative prices (discount stores and off-price retailers). Today, many retailers are banding together in corporate and contractual retail organizations (corporate chains, voluntary chains, retailer cooperatives, and franchise organizations).
Retailers are always searching for new marketing strategies to attract and hold customers. They face major marketing decisions about segmentation and targeting, store differentiation and positioning, and the retail marketing mix.
Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Those that try to offer “something for everyone” end up satisfying no market well. By contrast, successful retailers define their target markets well and position themselves strongly.
Guided by strong targeting and positioning, retailers must decide on a retail marketing mix—product and services assortment, price, promotion, and place. Retail stores are much more than simply an assortment of goods. Beyond the products and services they offer, today’s successful retailers carefully orchestrate virtually every aspect of the consumer store experience. A retailer’s price policy must fit its target market and positioning, products and services assortment, and competition. Retailers use various combinations of the five promotion tools—advertising, personal selling, sales promotion, PR, and direct marketing—to reach consumers. Online, mobile, and social media tools are playing an ever-increasing role in helping retailers to engage customers. Finally, it’s very important that retailers select locations that are accessible to the target market in areas that are consistent with the retailer’s positioning.
Retailers operate in a harsh and fast-changing environment, which offers threats as well as opportunities. Following years of good economic times, retailers have now adjusted to the new economic realities and more thrift-minded consumers. New retail forms continue to emerge. At the same time, however, different types of retailers are increasingly serving similar customers with the same products and prices (retail convergence), making differentiation more difficult. Other trends in retailing include the rise of megaretailers; the rapid growth of direct, online, mobile, and social media retailing; the need for omni-channel retailing; the growing importance of retail technology; a surge in green retailing; and the global expansion of major retailers.
Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose of resale or business use. Wholesalers fall into three groups. First, merchant wholesalers take possession of the goods. They include full-service wholesalers (wholesale merchants and industrial distributors) and limited-service wholesalers (cash-and-carry wholesalers, truck wholesalers, drop shippers, rack jobbers, producers’ cooperatives, and mail-order wholesalers). Second, brokers and agents do not take possession of the goods but are paid a commission for aiding companies in buying and selling. Finally, manufacturers’ and retailers’ branches and offices are wholesaling operations conducted by non-wholesalers to bypass the wholesalers.
Like retailers, wholesalers must target carefully and position themselves strongly. And, like retailers, wholesalers must decide on product and service assortments, prices, promotion, and place. Progressive wholesalers constantly watch for better ways to meet the changing needs of their suppliers and target customers. They recognize that, in the long run, their only reason for existence comes from adding value, which occurs by increasing the efficiency and effectiveness of the entire marketing channel. As with other types of marketers, the goal is to build value-adding customer relationships.
Shopper marketing (p 368)
Specialty store (p 369)
Department store (p 369)
Supermarket (p 370)
Convenience store (p 371)
Superstore (p 371)
Category killer (p 371)
Service retailer (p 371)
Discount store (p 371)
Factory outlet (p 372)
Warehouse club (p 372)
Corporate chains (p 373)
Shopping center (p 380)
Showrooming (p 383)
Wholesaling (p 387)
Wholesaler (p 387)
Go to mymktlab.com to complete the problems marked with this icon .
13-1 Define omni-channel retailing and explain its connection to shopper marketing. (AACSB: Communication)
13-2 Explain the various marketing decisions retailers must consider in designing strategies to attract and hold customers. (AACSB: Communication)
13-3 Name and describe the three types of off-price retailers. How do off-price retailers differ from discount stores? (AACSB: Communication)
13-4 Name and describe the three major groups of wholesalers. (AACSB: Communication; Reflective Thinking)
13-5 Discuss the marketing mix decisions faced by wholesalers. What current challenges do wholesalers face? (AACSB: Communication; Reflective Thinking)
13-6 You need a new pair of jeans, and you have several retail options. From Table 13.1, choose three different major store retailer types and select a specific store for each type chosen. Visit each store and describe each store’s segmentation and positioning strategy and retail marketing mix—product, price, place, and promotion. How do the product assortments differ? What is each store’s pricing approach? What promotional tools are used? Discuss store locations. (AACSB: Communication; Reflective Thinking; Use of IT)
13-7 In a small group, present a plan for a new retail store. Who is the target market? Describe the merchandise, atmospherics, price points, services provided, location, and how you would promote your retail store. Describe how you will differentiate your store from competitors. (AACSB: Communication; Reflective Thinking)
13-8 Identify a retailer that is currently struggling. Discuss why it is having difficulties and suggest ways to turn things around. (AACSB: Communication; Reflective Thinking)
The convenience of running to the store for a few grocery items can be hampered by long checkout lines. The creative geniuses at Selfycart solved this issue by developing an app that allows shoppers to browse, scan, and pay for products in participating stores using their mobile devices without waiting in line. Selfycart’s technology continues to change, including a virtual shopping cart, shopping lists, historical purchase information, list sharing, and a coupon portal that virtually clips coupons. Selfycart also developed a daily deal section that offers discounts and special offers specific to each store. Selfycart will eventually introduce online ordering so consumers can add products to a virtual shopping cart, pay, and arrange store pickup at a specified time. Selfycart continues to discover new ways to create value for its users. Suddenly, skipping the line is an extremely appealing prospect!
13-9 Investigate the Selfycart app. What benefits and challenges will stores face in introducing Selfycart or any other mobile checkout app? (AACSB: Communication; Use of IT; Reflective Thinking)
13-10 If Selfycart or a similar mobile checkout app was available at your grocery store, would you use it? What benefits would you gain by using this new technology? Discuss the challenges you would face. (AACSB: Communication; Reflective Thinking)
The Lilly Pulitzer brand of brightly colored dresses and resort-themed designer items is the uniform of the preppy, Palm Beach set. Indeed, only select young women belonging to certain sororities in certain communities are allowed discounts on the $100 to $500 items. But Target created a buying frenzy by debuting its Lilly for Target collection in April 2015. Target’s Pulitzer line comprised 250 items, such as Lilly dresses at $40, which sold out within minutes of launch, crashed the store’s website, and created a firestorm of negative online comments from customers. The long lines outside stores caused one manager to name the event “Preppy Black Friday,” likening it to the frenzied shopping day after Thanksgiving known as Black Friday. Most shoppers went home empty-handed because others scooped up as much as they could, emptying the racks within minutes. Items then sold on eBay for much higher prices. This type of launch is not new for Target. In 2011, the retailer launched a line of Missoni items priced at $30 to $40. Missoni’s distinctive zigzag- and geometric-patterned knitwear, shoes, and houseware items normally sell for hundreds of dollars at retailers such as Bloomingdale’s and Saks Fifth Avenue. During the Missoni event, shoppers grabbed goods by the armload, even poaching items from other shoppers’ carts. While some shoppers went away happy, many more were not. In both merchandise promotions, Target officials announced the sold-out items would not be replenished.
13-11 Is it ethical for retailers to create a promotion but not have sufficient merchandise for all shoppers who want to buy the items? (AACSB: Communication; Ethical Reasoning)
13-12 Is it smart for Target to create such shopping frenzies even though some customers are dissatisfied? Explain why or why not. (AACSB: Communication; Reflective Thinking)
Retailers need merchandise to make sales. In fact, a retailer’s inventory is its biggest asset. Not stocking enough merchandise can result in lost sales, but carrying too much inventory increases costs and lowers margins. Both circumstances reduce profits. One measure of a reseller’s inventory management effectiveness is its stockturn rate (also called inventory turnover rate for manufacturers). The key to success in retailing is realizing a large volume of sales on as little inventory as possible while maintaining enough stock to meet customer demands.
13-13 Refer to Appendix 2: Marketing by the Numbers, and determine the stockturn rate of a retailer carrying an average inventory at cost of $350,000, with a cost of goods sold of $800,000. (AACSB: Communication; Analytical Reasoning)
13-14 If this company’s stockturn rate was 3.5 last year, is the stockturn rate calculated above better or worse? Explain. (AACSB: Communication; Reflective Thinking)
Once the leader in discount retailing, Kmart long ago took a back seat to Walmart, Target, and others discount chains. But recent efforts to provide value to customers through innovation show that the veteran retailer may still have its edge. To gain a competitive one-up, Kmart started a unique program that combined the benefits of online and brick-and-mortar shopping. When an item that customers wanted to purchase was not in stock at one of its stores, Kmart would ship the item to the customer’s home for free.
To launch this program, Kmart unveiled an ad campaign that illustrated an uncharacteristic relevance to younger, tech-savvy customers. With the slight-of-mouth message that customers could “ship their pants” (or any of the other 65 million items in Kmart’s inventory) for free, the ad went viral. As a result, Kmart got its message out in spades, entertaining many while offending a few along the way.
After viewing the video featuring Kmart, answer the following questions:
13-15 Consider the retail marketing mix. How did Kmart differentiate itself from other retailers with its free shipping program?
13-16 What kind of customer does the “Ship My Pants” campaign target? How is this significant?
13-17 Discuss what will be the ultimate effects of this Kmart campaign.
Outdoor-products megaretailer Bass Pro Shops has seemingly been breaking the rules of retail for more than 40 years, basking in the spoils as a result. With more than 90 retail stores throughout the United States and Canada, the privately held Springfield, Missouri–based company reeled in $4.3 billion in revenues last year—nearly $50 million per store—making it the nation’s number-one outdoor-products retailer. Going against common retail wisdom, Bass Pro Shops stores are enormous and are packed to the rafters with overhead. Even more daring, the chain has achieved retail success by targeting customers who hate to shop. The typical Bass Pro Shops customer is a reclusive male outdoorsman who yearns for the great outdoors but detests jostling crowds and shopping.
Over the past few decades, Bass Pro Shops has evolved from a popular mail-order catalog business into one of the nation’s hottest store retailers. Despite Bass Pro Shops often-remote locations, customers flock to its superstores to buy hunting, fishing, and outdoor gear. Nearly 200 million people visited a Bass Pro Shops store last year—almost double the number that attended games put on by the NFL, NBA, and MLB combined. In a true display of “destination retail,” customers drive an average of more than 50 miles to get to a Bass Pro Shops store (some drive hundreds of miles) and stay an average of 2 hours. Schools, churches, and senior centers even send people in by the busload.
So what explains Bass Pro Shops’s climb to the top? Bass Pro Shops’s ability to reel in hordes of otherwise reluctant shoppers to its stores is part of a double-hook strategy that dates back to the company’s beginning. First, each store guarantees a product assortment as wide as the Mississippi River and as deep as the Mariana Trench. In 1971, Johnny Morris—a tournament fisherman and avid outdoorsman—was frustrated by the lack of decent fishing tackle in sporting goods stores. With the ink on his college diploma barely dry, he rented a U-Haul trailer and headed out on a cross-country road trip, filling the trailer with the latest and greatest in premium fishing tackle. Returning to Springfield, he set up shop in his father’s liquor store near Table Rock Lake. With that, Bass Pro Shops was born.
That first Bass Pro Shops store quickly outgrew his dad’s liquor store, and within a few years, Morris’s vision for what he wanted Bass Pro Shops to become began to take shape. At the time, the sporting goods retail sector was fragmented with lots of independent retail shops catering to different outdoor activities. To meet the needs of customers across the country, Bass Pro Shops printed its first catalog in 1974. The company’s catalog business has been a mainstay ever since.
At the same time, the company moved to fill a gap in brick-and-mortar retail. With no national chain that could serve the outdoor-loving masses, Bass Pro Shops quickly moved beyond fishing, adding hunting, camping, outdoor cooking gear, outdoor footwear and apparel, and nature-themed gifts. During this expansion, Bass Pro Shops not only carried the leading national brands, it also developed a portfolio of store brands, including its first brand, Bass Tracker—the first and still-market-leading dedicated bass boat. By manufacturing and selling direct, Bass Pro Shops could not only pass on huge savings to customers, it could compete on price with just about any company.
As Bass Pro Shops grew rapidly throughout the 1970s, the second hook of its strategy solidified with the opening of the first Outdoor World showroom adjacent to its headquarters. From that day on, Bass Pro Shops became more than a chain of stores that sells lots of cool outdoors stuff—it became a place that provided engaging customer experiences for all who visited. Bass Pro Shops has now created what amounts to a natural history theme park for outdoor enthusiasts—the “Walt Disney World” of sporting goods.
Take the store in Memphis, Tennessee, for example—Bass Pro Shops at the Pyramid. Former home of the Memphis Grizzlies, the 535,000-square-foot, 32-story glass-and-steel Pyramid now houses the largest Bass Pro Shops store. The store is dominated by various representations of wildlife, from the deer, duck, turkey, bear, bobcat, and wolf tracks imprinted in the concrete floors to the hand-painted murals from renowned artists depicting nature scenes reflecting local geography.
But the Pyramid brings wildlife to life in three dimensions. Each store features lifelike, museum-quality taxidermy animals in action poses—everything from prairie dogs, deer, elk, and caribou to brown bears, polar bears, musk oxen, and mountain goats—set in natural dioramas that make customers feel as though they’re on location in striking outdoor landscapes. And although the animals are stuffed, the Pyramid store boasts 600,000 gallons of water features stocked with live fish and other wildlife. Features include the cypress swamp with an 84,000-gallon alligator habitat (live feedings every Saturday) surrounded by 100-foot-tall trees and the Live Duck Aviary with a four-pond multi-habitat home to five species of ducks.
The carefully orchestrated wildlife displays set the structure for what amounts to one of the most dynamic and captivating retail adventures in the world. Visitors can ride the nation’s tallest freestanding glass elevator to the Lookout, a breathtaking glass-floored cantilevered observation deck at the top of the Pyramid. From there, they can survey the view outside the store as well as inside. And there is plenty to see inside, including the arcade shooting gallery, archery and pistol ranges, Beretta Fine Gun Center, interactive Ducks Unlimited Waterfowling Heritage Center, and the 103-room Big Cypress Lodge.
Because visitors to Bass Pro Shops at the Pyramid often make a day of it, the store has two full-service restaurants on site, including Uncle Buck’s Fishbowl & Grill, one of six company-owned restaurant chains. Uncle Buck’s offers a nautical-themed dining experience with a saltwater aquarium that weaves in and around the restaurant, offering diners full views of exotic and tropical fish. And before or after the meal, diners can work up an appetite or work off calories in the Fishbowl’s 13-lane ocean-themed bowling alley where the balls are returned through a shark’s gaping jaws.
Bass Pro Shops at the Pyramid is larger and more fantastic than any of the chain’s other stores. But each Outdoor World store is designed to shower shoppers with the same captivating experience. Most stores are just under 200,000 square feet—about the size of the average Walmart Supercenter—with only one restaurant and no hotel. But the rest of the Bass Pro Shops formula plays out in magnificent splendor across its many North American outlets. One mother sums up the Bass Pro Shops experience this way:
We recently had a visiting family group that included two 5-year-olds. They thoroughly enjoyed our trip to Bass Pro Shops! It’s half retail store and half wildlife museum. There was plenty to see for any outdoor sports enthusiast. The kids loved seeing real fish and ducks, as well as plenty of inanimate displays. There were boats they could sit on and “trees” they could hide in. The store includes a restaurant. They offer plenty of merchandise for every budget, but you don’t really have to spend money to enjoy the visit. Highly recommended!
With its retail design that builds theater and entertainment into every store, Bass Pro Shops is not only a haven for the reluctant male outdoorsman, it’s enjoyable for everyone else. “First off, I am not an outdoor person so Bass Pro isn’t a shop for me,” says a recent store visitor. “That being said, I loved this store. I felt like I was in a museum and aquarium.”
Bass Pro Shops provides even more reasons to visit, with various special events such as Family Summer Camp, Professional Bull Riders Event, Fall Hunting Classic, and Halloween Bass Pro Style. Each event is filled with demonstrations and activities, including fishing and hunting seminars featuring national and local experts. But no other Bass Pro Shops event compares to Santa’s Wonderland, a six-week extravaganza that transforms each Bass Pro Shops outlet into a veritable Christmas village featuring rustic cabins, moving model trains, animated Christmas characters, interactive talking caribou, and live elves set among snow-covered hills and illuminated Christmas trees. Kids can hang out in the play zone and get their hands on old-time model trains, RC trucks, slot cars, and both laser and foam-dart guns. Families can spend time at various activity tables and make decorations and crafts to take home. They can also enjoy one of various seasonal goodies. And, of course, Santa’s Wonderland wouldn’t be complete without a visit from the jolly old elf himself, the event’s main feature that includes a free studio-quality photo.
As amazing as Bass Pro Shops’s retail design is, the company is not alone in its approach to marketing the great outdoors. Nebraska-based Cabela’s started its own operations just before Bass Pro Shops. Cabela’s has almost as many stores and pulls in nearly as much revenue. The Cabela’s retail experience is nearly identical to that of Bass Pro Shops, down to the aquariums, animal-filled dioramas, and shooting galleries.
However, the two chains have at least one major difference: Whereas Bass Pro Shops is thriving, Cabela’s long and successful run has been dogged in recent years by declining sales and losses. Falling victim to the intense competition from online vendors, Cabela’s was recently ranked by Forbes as the nation’s second-most troubled retail chain, trailing only the now-defunct Radio Shack. As Cabela’s has explored options to escape bankruptcy, the most prominent option at this point appears to be selling the company—to Bass Pro Shops. That’s right. The number-two outdoor retailer is currently entertaining an offer from number one. And if it goes through, Bass Pro Shops would not only double in size (the two chains rarely have stores in the same market), it would gain economy-of-scale advantages including cost savings and greater leverage with manufacturers.
But even if the acquisition of Cabela’s doesn’t pan out, Bass Pro Shops will keep doing what it has been doing for decades—wowing customers with the unsurpassed retail experience of its nature theme parks. “People spend time there when they go,” Morris says of Bass Pro Shops stores. “They can’t wait to see what’s around the next aisle. It’s an experience. It’s about creating memories. It’s about being with friends and family. It’s about having fun.”
13-18 Define Bass Pro Shops’s targeting strategy. Does the chain provide a truly differentiated experience?
13-19 Describe how Bass Pro Shops became the nation’s leading outdoor retailer based on the retail marketing mix.
13-20 In terms of the major types of retailers, how would you classify Bass Pro Shops?
13-21 Why is Bass Pro Shops succeeding while Cabela’s is floundering?
13-22 Is it a good idea for Bass Pro Shops to acquire Cabela’s? Explain.
Sources: Sean McCoy, “Mega-Outdoors? Bass Pro, Cabela’s Merger May Be on Horizon,” Gear Junkie, May 31, 2016, https://gearjunkie.com/bass-pro-shops-cabelas-acquisition; Liyan Chen, “Next RadioShack? Here Are the Most Troubled Retails Stores,” Forbes, February 10, 2015, www.forbes.com/sites/liyanchen/2015/02/10/next-radioshack-here-are-the-most-troubled-retail-stocks/#7d35e34dbc44; “Cabela’s May Have a New Suitor,” Fortune, April 20, 2016, www.fortune.com/2016/04/20/cabelas-suitor-goldman-sachs/; Lee Tolliver, “Money Hasn’t Changed Humble Bass Pro Founder,” The Virginian-Pilot, January 16, 2011, www.pilotonline.com/sports/outdoors/money-hasn-t-changed-humble-bass-pro-founder/article_939a1378-026d-517b-9875-dd01ddc69b8e.html; and www.basspro.com/webapp/wcs/stores/servlet/CFPageC?appID=94&storeId=10151&catalogId=10051&langId=-1&tab=3, www.tripadvisor.com, and www.basspro.com, accessed September 2016.
Go to mymktlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:
13-23 What is retail convergence? Has it helped or harmed small retailers?
13-24 Describe the types of shopping centers and identify specific examples in your community or a nearby city.
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