Chapter 14 – Retailing
Retailing - The set of business activities that add value to products and services sold to consumers for
their personal or family use; includes products bought at stores, through catalogues, and over the
internet, as well as services such as fast food, airlines and hotels.
No longer do manufacturers rule marketing channels, Retail giants such as Wal-Mart, dictate to
their suppliers what should be made, how it is to be configured, when it should be delivered
and to some extent what it should cost
Virtually every penny a consumer spends outside of taxes in done so through retailers.
The Changing retail Landscape
The Big Middle (14.1) – The Big Middle refers to that part of the market in which the most successful
retailers compete because the biggest potential customer base resides there.
New retailers often start out with an innovative format, offer a low price advantage or both.
Over time the most successful “innovative” and “low price” competitors drift into the big middle
Customers become loyal to big middle retailers because they provide them with what they
need: good customer service, and excellent loyalty programs
Firms get to The Big Middle through innovations in products, formats or operational excellence
leading to low prices and great value
Must understand their S and W’s, keep an eye on target markets as well as competition and do
everything they can to grow and retain a loyal customer base
Formally Big Middle was made up of traditional department stores like Eatons but has shifted to
low price leaders such as Wal-Mart and Zellers
The Wheel of Retailing (14.2) – Generally retailers enter with low prices, low margins and low status.
Over time they add more and more services and improvements and are thus able to raise prices, earn
higher margins and achieve higher status with consumers.
As stores add services and improvements in the mix that consumer’s value, this increases their
costs, which result in higher prices. This creates opportunities for new firms to enter.
How Retailers Create Value - retailers add value by bringing everything together in one location.
They have a broad selection of items which can be seen, touched, and tested to a certain extent. You
can purchase one item, or multiple items and there are sales associated present to aid in the purchase
process and provide information.
Value retailers continue to increase their shopability by providing more convenient store
layouts, and shopping experiences that make the task faster and easier
4 P’s to Create Value in Retailing
Product - Typical retailers can carry anywhere from 30,000 to 200,000 items. Providing the right
mix of merchandise and services that satisfies the needs of the targeted market and creating
value is critical to the success of retailers.
o Retailers provide value to both customers and manufacturers by performing a storage
o Often difficult for retailers to distinguish themselves from competitors through
merchandise because other retailers can purchase and sell same items Private-Label Brands – Brands developed and marketed by a retailer and
available only from that retailer; store brands such as PC or Equate.
Price – Price helps define the value of both the merchandise and the service and the general
price range of goods within a particular store helps to define its image and target.
o Price must be aligned with other elements of retail mix. For example, would not pay $20
for a chocolate bar from a variety store, but if wrapped properly and sold at a specialty
store, $20 could seem like a bargain
Promotion – Good promotion both within the retail environment as well as throughout mass
media can be the difference between success and failure for retailers.
o Advertising through traditional media sources continues to be important to get
customers in the store
o Once inside the retail location firms use signs and displays placed at point of purchase or
in strategic areas to inform consumers and stimulate purchases
o Store cards are more subtle forms of in store promotional efforts.
o These promotions increase average purchase size, and create opportunity for repeat
o Retailers must provide services that make the purchase and use of products easier.
Things like qualified sales reps, help hotlines, warranties all make it easier regardless of
where the item is bought and help to increase a firms share of wallet
Share of Wallet – the percentage of the customers purchases made form a
Place – Convenient locations are key ingredients for successful retailing. Many customers
choose stores and the basis of where they are located.
o This makes having a good location a competitive advantage that few competitors can
Types of Retailers
Category Description Examples
Conventional Supermarket Offer groceries, meat and produce with Sobeys, Whole Foods etc.
limited sales of non-food items, such as
health and beauty aid and general
merchandise in a self-serve format
Big Box food retailers Come in three types: Supercenters, Super Centers such as Zehrs and
Hypermarkets and warehouse clubs. warehouse clubs such as Costco
Larger than conventional grocers they more popular in Canada, hyper
carry large selections of food and non- markets flourish in Europe