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CHAPTER 8
Retailing

Retailing
Retailingall the activities directly related to the sale of goods and services to the
ultimate consumer for personal, non business usehas enhanced the quality of
our daily lives.

Classification of Retail Operations

A retail establishment can be classified according to its 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 franchise outlet.
i.

Independent Retailers

Retailers owned by a single person or partnership and not operated as part of a

larger retail institution are independent retailers.
Around the world, most retailers are independent, operating one or a few stores in
their community.
Local florists, shoe stores, and food markets typically fit this classification.
ii. Chain Stores
Chain stores are owned and operated as a group by a single organization.
Under this form of ownership, many administrative tasks are handled by the home
office for the entire chain. Example Mydin.
The home office also buys most of the merchandise sold in the stores.
iii. Franchises
Franchises are owned and operated by individuals but are licensed by a larger
supporting organization.
Franchising combines the advantages of independent ownership with those of the
chain store organization. Example Mcdonald.

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b) Level of Service
The level of service that retailers provide can be classified from full service to
self-service.
Some retailers, such as exclusive clothing stores, offer high levels of service.
They provide alterations, credit, delivery, consulting, gift wrapping, and personal
shopping.
Discount stores usually offer fewer services or no services.
c) Product Assortment
Discount specialty stores like IKEA or Toys R Us carry a broad assortment in
concentrated product lines, such as building and home supplies or toys.
d) Price
Price is a fourth way to position retail stores.
Traditional department stores and specialty stores typically charge full suggested
retail price.
In contrast, discounters factory outlets, and off price retailers use low prices as a
major lure for shoppers.

Major Types of Retail Operations

1

6a

6b

6c

6d

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1) Department Stores
Housing 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.
Purchases are generally made within each department rather than at one central
check-out area. Each department is treated as a separate buying center to achieve
economies in promotion, buying, service, and control.
Example : Metrojaya

2) Specialty Stores
Specialty store formats allow retailers to refine their segmentation strategies and
tailor their merchandise to specific target markets.
Examples include childrens clothing, mens clothing, candy, baked goods,
gourmet coffee, sporting goods, and pet supplies.
Example : Cosmetic MAC, Ogawa, Vincii, Starbucks
3) Supermarkets
Supermarketslarge, departmentalized, self-service retailers that specialize in
food and some non-food items.
Example : Giant, Tesco Supermarket
Superstores offer one-stop shopping for many food and nonfood needs, as well as
many servicesincluding pharmacies, flower shops, salad bars, in-store bakeries,
takeout food sections, sit-down restaurants, health food sections.
Scrambled Merchandising
This tendency to offer a wide variety of nontraditional goods and services under
one roof is called scrambled merchandising.
Loyalty Marketing Programs
Many supermarket chains are tailoring marketing strategies to appeal to specific
consumer segments to help them stand out in an increasingly competitive
marketplace. Most notably is the shift toward loyalty marketing programs that
reward loyal customers carrying frequent-shopper cards with discounts or gifts. Jcard, Sogo Card
4) Drugstores
Drugstores also carry an extensive selection of over the counter (OTC)
medications, cosmetics, health and beauty aids, seasonal merchandise, specialty
items such as greeting cards and a limited selection of toys, and some non
refrigerated convenience foods.
Example : Guardian Pharmacy, Watson
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5) Convenience Stores
A convenience store can be defined as a miniature supermarket, carrying only a
limited line of high-turnover convenience goods.
These self-service stores are typically located near residential areas and are open
twenty-four hours, seven days a week. Convenience stores offer exactly what
their name implies: convenient location, long hours, fast service.
However, prices are almost always higher at a convenience store than at a
supermarket. Thus the customer pays for the convenience.
Example : 7e, KK Mart or Kedai Mesra
6) Discount Stores
A discount store is a retailer that competes on the basis of low prices, high
turnover, and high volume.
Discounters can be classified into four major categories: full-line discount stores,
discount specialty stores, warehouse clubs, and off-price discount retailers.
6a) Full-Line Discount Stores
full-line discount stores offer consumers very limited service and carry a
much broader assortment of well-known, including housewares, toys,
automotive parts, hardware, sporting goods, and garden item, as well as
clothing, bedding, and linens.
Full-line discounters are often called mass merchandisers. Discounts for all
items.

6b) Specialty Discount Stores

Another discount includes the single-line specialty discount storesfor
example, stores selling sporting goods, electronics, auto parts, office supplies,
and toys.
These stores offer a nearly complete selection of single line merchandise and
use self-service, discount prices, high volume, and high turnover to their
advantage.
Specialty discount stores are often termed category killers because they so
heavily dominate their narrow merchandise segment. Examples include Toys
R Us in toys, Home Depot in home improvement supplies, IKEA in home
furnishings. Only certain times have promotion or discount.

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6c) Warehouse Membership Clubs

Warehouse membership clubs sell a limited selection of brand-name appliances,
household items, and groceries.
These are usually sold in bulk from warehouse outlets on a cash-and-carry basis
to members only. Individual members of warehouse clubs are charged low to no
membership fees.
Warehouse club members tend to be more educated and more affluent and have a
larger household than regular supermarket shoppers.
Macro, jcard, sogo. Non-member cannot get discount or sometimes cannot get in
the store during members day.

6d) Off-Price Retailers

An off-price retailer sells at prices 25 percent or more below traditional
department store prices because it pays cash for its stock and usually doesnt ask
for return privileges.
Off-price retailers by manufacturers overruns at cost or even less. They also
absorb goods from bankrupt stores, irregular merchandise, and unsold end-ofseason output.
Factory Outlet are an interesting variation on the off-price concept.
A factory outlet is an off-price retailer that is owned and operated by a
manufacturer

7) Restaurant
Restaurants straddle the line between a retailing establishment and a service
establishment.
Restaurants do sell tangible products, food and drink, but they also provide a
valuable service for consumers in the form of food preparation and food service.
Most restaurants could even fall into the definition of a specialty retailer given
that most concentrate their menu offerings on a distinctive type of cuisinefor
example, Starbucks coffee houses, Kentucky Fried Chicken, and Pizza Hut pizza
restaurants.

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Nonstore Retailing

The retailing methods discussed so far have been at the origin in-store methods, in
which customers must physically shop at stores.
In contrast, nonstore retailing is shopping without visiting a store.
Because consumers demand convenience, nonstore retailing is currently growing
faster than in-store retailing. The major forms of nonstore retailing are:
1) Automatic vending
2) Direct retailing
3) Direct marketing
4) Electronic retailing

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1) Automatic Vending
A low-profile yet important form of retailing is automatic vending, the use of
machines to offer goods for salefor example, the cola, candy, or snack vending
machines found in college cafeterias and office buildings.
Due to their convenience, consumers are willing to pay higher prices for products
from a vending machine than for the same products in traditional retail settings.

2) Direct Retailing
In direct retailing, representatives sell products door-to-door, office-to-office, or
at home sales parties.
Companies like Avon and Mary Kay Cosmetics depend on these techniques.
Even personal computers are now being sold through direct retailing methods.
The company targets new users of technology who need more support with the
purchase, setup, and learning of computers and the Internet.

3) Direct Marketing (or Direct-response marketing)

Direct marketing, sometimes called direct-response marketing, refers to the
techniques used to get consumers to make a purchase from their home, office, or
other non retailing setting.
Those techniques include direct mail, catalogs and mail order, telemarketing, and
electronic retailing.
a) Direct Mail
Direct mail can be the most efficient or the least efficient retailing method,
depending on the quality of the mailing list and the effectiveness of the mailing
piece.
With direct mail, marketers can precisely target their customers according to
demographics, geography, and even psychographics.
Direct mail involves sending advertising directly to the consumer.
The mail is directed solely to a particular neighborhood or individual address.
Send brochures from home to home.
b) Catalogs and Mail Order
Consumers can now buy just about anything through the mail and catalogs.
For Example, Cosway, Avon, Tupperware

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c) Telemarketing
Telemarketing is the use of telephone to sell directly to consumers.
Outbound telemarketing is call customers and prospects to sell products and
services, generate and qualify leads, prompt them to visit stores and showrooms
and set appointments. Give existing buyers heads-up on hot deals.
Inbound telemarketing is customer call and order such as Mcdonals.

4) Electronic Retailing
Electronic retailing includes the twenty-four-hour, shop-at-home television
networks and online retailing.
a) Shop-At-Home Networks
The shop-at-home television networks are specialized forms of direct-response
marketing.
These shows display merchandise, with the retail price, to home viewers. Viewers
can phone in their orders directly on a toll-free line and shop with a credit card.
Shop-at-home networks have the capability of reaching nearly every home that
has a television set. For example SmartShop, Go-shop@astro.
b) Online Retailing
For many people today, it means turning on a computer, surfing retail Web sites,
and selecting and ordering products online with the click of a mouse.
Online retailing, or e-tailing, is a type of shopping available to consumers with
personal computers and access to the Internet. For example, www.mudah.my or
www.lelong.com, instagram, facebook etc.

Franchising
Franchise

- A franchise is a continuing relationship in which a franchiser grants to a

franchisee the business rights to operate or to sell a product.

Franchiser - The franchiser originates the trade name, product, methods of operation,
and so on.
Franchisee - The franchisee, in return, pays the franchiser for the right to use its name,
product, or business methods.

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A franchise agreement between the two parties usually lasts for ten to twenty years, at
which time the franchisee can renew the agreement with the franchiser if both parties
are agreeable.
The franchisee may also be expected to pay advertising fees, which usually cover the
cost of promotional materials and, if the franchise organization is large enough,
regional or national advertising.
The size of the restaurant facility, area of the country, inventory, selection of kitchen
equipment, signage, and style of dcor and landscaping affect new restaurant costs.

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Retail Marketing Strategy/ Retailing Mix

The key tasks in strategic retailing are defining and selecting a target market and
developing the six Ps of the retailing mix to successfully meet the needs of the chosen
target market: the traditional four Ps plus personnel and presentation, as discussed below.

STEP 1
Defining a Target Market
The first and foremost task in developing a retail strategy is to define the target
market.
Successful retailing has always been based on knowing the customer.
Target markets in retailing are often defined by demographics, geographic, and
psychographics.
STEP 2
Choosing the Retailing Mix
1
6

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1) The Product Offering

The first element in the retailing mix is the product offering, also called the
product assortment or merchandise mix.
Retailers decide what to sell on the basis of what their target market wants to buy.
After determining what products will satisfy target customers desires, retailers
must find sources of supply and evaluate the products.
When the right products are found, the retail buyer negotiates a purchase contract.
2) Place or site location
Another element in the retailing mix is place, or site location. Selecting a proper
site is a critical decision.
First, whether the retailer leases or a purchase
Second, the location will affect future growth. The chosen area should be growing
economically so it can sustain the original store and any future stores.
Site location begins by choosing a community. This decision depends largely on
economic growth potential and stability, the competition, political climate, and so
on.
A particular sites visibility, parking, entrance and exit locations, accessibility,
and safety and security issues are other variables contributing to site selection
success.
3) Promotion
Retail promotion strategy includes advertising, public relations and publicity, and
sales promotion.
The goal is to help position the store in customers minds. Retailers design
intriguing ads, stage special events, and develop promotions aimed at their target
markets.
For example, todays grand openings are a carefully orchestrated blend of
advertising, merchandising, goodwill, and glitter. All the elements of an
openingpress coverage, special events, media advertising, and store displays
are carefully planned..
4) Price
Higher prices often indicate a level of quality and help reinforce the prestigious
image of retailers, as they do for Gucci and Coach.
On the other hand, discounters and off-price retailers, such as Reject Shop offer a
good value for the money.
There are even stores, such as Kedai RM2, where everything costs shoppers two
Ringgit.
Everyday Low Pricing (EDLP) - a pricing trend among American retailers that
seems to be here to stay is everyday low pricing, or EDLP.

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5) Presentation of the Retail Store

The presentation of a retail store helps determine the stores image and positions
the retail store in consumers minds.
For instance, a retailer that wants to position itself as an upscale store would use a
lavish or sophisticated presentation.
Atmosphere - The main element of a retail store helps determine the stores
image and positions its atmosphere, the overall impression conveyed by a stores
physical layout, dcor, and surroundings.
These are the most influential factors in creating a stores atmosphere:

Employee type and density: Employee type refers to an employees

general characteristicsfor instance, neat, friendly, knowledgeable, or
service oriented. Density refers to the number of employees per thousand
square feet of selling space.

Merchandise type and density: They type of merchandise carried and how
it is displayed add to the atmosphere the retailer is trying to create.

Fixture type and density: Fixtures can be elegant (rich woods), trendy
(chrome and smoked glass), or consist of old, beat-up tables, such as in an
antique store.

Sound: Sound can be pleasant or unpleasant for a customer. Classical

music at a nice Italian restaurant helps create ambience, just as countryand-western music does at a truck stop.

Odors: Smell can either stimulate or detract from sales. The wonderful
smell of pastries and breads entices bakery customers. Conversely,
customers can be repulsed by bad odors such as cigarette smoke, musty
smells, antiseptic odors, and overly powerful room deodorizers. Lovely
lace odor maybe strong for some people.

Visual factors: Colors can create a mood or focus attention and therefore
are an important factor in atmosphere. Red, yellow, and orange are
considered warm colors and are used when a feeling of warmth and
closeness is desired. Some colors are better for display. For instance,
diamonds appear most striking when against black or dark blue velvet.

6) Personal and Customer Service

Most retail sales involve a customer-salesperson relationship, if only briefly.
When customers shop at a grocery store, the cashiers check and bag their
groceries.
When customers shop at a prestigious clothier, the sales clerks may help select the
styles, sizes, and colors.
They may also assist in the fitting process, offer alteration services, wrap
purchases, and even offer a glass of champagne.

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New Development in Retailing

a) Interactivity
Adding interactivity to the retail environment is one of the most popular strategies
in retailing.
Retailers used entertainment retailing in the form of playing music, showing
videos (Skateboarding), hosting special events (Sponsor) and sponsoring guest
appearance. (Faizal Tahir celebrity endorsement - DC Comics Super Heroes)
b) M-Commerce
M-Commerce (Mobile e-commerce) enables consumer using wireless to connect
to the internet and shop using mobile.
c) Pop-up Shops
The trend involves popping-up one day, then disappearing anywhere from one
day to several weeks later. These shops, while small and temporary, can build up
interest by consumer exposure.
Pop-up retail allows a company to create a unique environment that engages their
customers, as well as generates a feeling of relevance and interactivity.
For example Broadband Booth.
d) Small Stores Within A Larger Store
For example Popular Book Store in Tesco.

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