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Chapter 11.docx

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MKTG 2030
Neil Smith

Chapter 11: Retailing and Etailing Retailing  Retailing is the final stop on the distribution path, the process by which goods and services are sold to consumers for their personal use.  ‘The Wheel of Retailing’ is a hypothesis that states that new types of retailers find it easiest to enter the market by offering goods at lower prices than competitors; after they gain a foothold they gradually improve their facilities, products by increasing quality and this causes greater investment and operating costs so then the prices of their products eventually rise and now it makes it vulnerable for new entrants to charge lower prices and this is essentially the “wheel of retailing”. It helps explain the development of some but not all forms of retailing.  Retail Life Cycle theory categorizes retail stores in terms of the conditions they face at different points in the cycle. o Introduction Stage (new retailer, aggressive entrepreneur with an unique approach to doing business, profits are low in this stage due to high development costs) o Growth Stage (more customers, profits rise, open more stores) o Maturity Stage (competitors start to copy the idea, industry over expanded, intense competition, profits decline) o Decline Stage (new ways of doing business emerge and retail business becomes obsolete)  There are three important factors that motivate innovative merchants to reinvent the way they do business o Demographics- keeping up with changes in population characteristics, some major demographic factors are: Convenience for working women, specific age segments, and ethnic diversity. o Technology- examples include point-of-sale (POS) systems, personal preference cards, in-store video channels etc. o Globalization- retailers are busy expanding to other countries and bringing with them innovations and management philosophies that change the way local firms do business.  Retailers are classified by their merchandise mix (variety and selection of products it sells), it is classified by merchandise breadth (different type of products, for ex. Groceries, toys and grills) and merchandise depth (varieties of each product, for ex. 10 diff type of grills). Retailers are also classified by high/low margins and high/low inventory turnover rates.  Some major forms retailers take are: o Convenience Stores (7/11)- limited number of frequently purchased items, premium pricing o Supermarkets (Loblaws)- food stores that carry wide selection of edible and non-edible products o Specialty Stores (Running Room)- narrow and deep inventories o General merchandise discount stores (Walmart)- broad assortment of items at low prices with minimal service o Warehouse clubs (Costco)- new version of disco
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