Retailing

  1. Objective 13-3 Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.

There are more than 5 million brick-and-mortar retail establishments in the United States. Many consist only of owners and part-time help. Indeed, more than one-half of the nation’s retailers account for less than 10 percent of all retail sales. Retailers also include huge operations, such as Walmart, the world’s largest corporate employer, and Home Depot. Although there are large retailers in many other countries—Metro in Germany, Carrefour in France, and Aeon in Japan—most of the world’s largest retailers are U.S. businesses.

Types of Brick-and-Mortar Retail Outlets

U.S. retail operations vary widely by type as well as size. They can be classified by their pricing strategies, locations, range of services, or range of product lines. Choosing the right types of retail outlets is a crucial aspect of distribution strategy. This section describes U.S. retail stores by using three classifications: (1) product-line retailers, (2) bargain retailers, and (3) convenience stores.

Product-Line Retailers

Retailers featuring broad product lines include department stores, which are organized into specialized departments: shoes, furniture, women’s petite sizes, and so on. Stores are usually large, handle a wide range of goods, and offer a variety of services, such as credit plans and delivery. Similarly, supermarkets are divided into departments of related products: food products, household products, and so forth. They often stress low prices, self-service, and large selections.

In contrast, specialty stores, such as Lids, a retailer with more than 1,000 stores selling athletic fashion headwear, are small, serve specific market segments with full product lines in narrow product fields, and often feature knowledgeable salespeople.

Bargain Retailers

Bargain retailers carry wide ranges of products at low prices. Discount houses began by selling large numbers of items at substantial price reductions to cash-only customers. As name-brand items became more common, they offered better product assortments while still transacting cash-only sales in low-rent facilities. As they became more established, they began moving to better locations, improving decor, selling better-quality merchandise at higher prices, and offering services such as credit plans and noncash sales.

Catalog showrooms mail catalogs to attract customers into showrooms to view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses. Factory outlets are manufacturer-owned stores that avoid wholesalers and retailers by selling merchandise directly from factory to consumer. Wholesale clubs, such as Costco, offer large discounts on a wide range of brand-name merchandise to customers who pay annual membership fees.

Convenience Stores

Convenience store chains, such as 7-Eleven and Circle K stores, stress easily accessible locations, extended store hours, and speedy service. They differ from most bargain retailers in that they carry fewer products and generally charge somewhat higher prices in exchange for the convenience they provide.

Nonstore Retailing

Some retailers sell products without brick-and-mortar stores. Certain types of products, such as snack foods, bottled water, and soft drinks, sell well from card- and coin-operated machines. The same can be said for some forms of entertainment (pinball, video games, and billiards) when placed in certain venues (such as movie theater lobbies, bowling alleys, and so forth). Redbox has also been successful in renting DVDs and video games through free-standing kiosks that are essentially vending machines. For all products, global annual sales through vending were almost $200 billion in 2016. Still, vending machine sales make up less than 1 percent of all U.S. retail sales.

Nonstore retailing also includes direct-response retailing, in which firms contact customers directly to inform them about products and to solicit sales orders. Mail order (or catalog marketing) is a popular form of direct-response retailing practiced by Crate and Barrel and Garnet Hill. Less popular in recent years because of do-not-call registries, outbound telemarketing uses phone calls to sell directly to consumers. However, telemarketing also includes inbound toll-free calls from customers, a service that most catalog and other retail stores make available. Finally, more than 600 U.S. companies, including Mary Kay cosmetics, use direct selling to sell door-to-door or through home-selling parties. Avon Products, one of the world’s largest direct sellers, has approximately 5 million door-to-door sales representatives in more than 100 countries.3

Online Retailing

In 2014, global business-to-consumer (B2C) sales were nearly $2 trillion, and they are projected to exceed the $2 trillion level by 2017.4 More than 85 percent of the world’s online population—more than 1 billion consumers—have made online purchases. iTunes outsells brick-and-mortar music retailers, and Amazon is the world’s largest online retailer, selling nationally and internationally with total revenues in 2016 of almost $136 billion. Online retailing allows sellers to inform, sell to, and distribute to consumers using online technology. Some of the largest U.S. “e-tailers” are shown in Table 13.1. In addition to large companies, millions of small businesses around the globe have their own websites.

Table 13.1

Leading Online Retailers in Selected Consumer Products Categories*

Consumer Product Category Online Retailer
*Adapted from “Top 500 Guide,” Internet Retailer (2016), at www.internetretailer.com/top500/list/.
Mass Merchandise Amazon.com
Office Supplies Staples Inc.
Computers and Electronics Apple Inc.
Video and Audio Entertainment Netflix Inc.
Home Repair and Improvement Home Depot
Apparel and Accessories L.L. Bean Inc.
Home Furnishings and Housewares Williams-Sonoma Inc.
Toys Toys “R” Us Inc.
Health and Beauty Bath & Body Works
Sporting Goods Cabela’s Inc.

Electronic Catalogs

E-catalogs use online displays of products to give millions of retail and business customers instant access to product information. The seller avoids the costs of printing and mail distribution, and once an online catalog is in place there are lower costs in maintaining and updating it. About 90 percent of all catalogs are now online, with digital sales accounting for more than 50 percent of all catalog sales.

Electronic Storefronts and Cybermalls

Each seller’s website is essentially an electronic storefront (or virtual storefront) from which shoppers collect information about products and buying opportunities, place orders, and pay for purchases. Producers of large product lines, such as Dell, dedicate storefronts to their own product lines. Other sites, such as Newegg.com, which offers computer and other electronics equipment, are category sellers whose storefronts feature products from many manufacturers.

Search engines such as Google and Dogpile serve as cybermalls, collections of virtual storefronts representing diverse products and offering speed, convenience, 24-hour access, and efficient searching. After entering a cybermall, shoppers can navigate by choosing from a list of stores (L.L. Bean, Lids, or Macy’s), product listings (sporting goods, women’s fashion, or mobile devices), or departments (apparel or bath/beauty).

Interactive and Video Retailing

Today, retailers and B2C customers interact with multimedia sites using voice, graphics, animation, film clips, and access to live human advice. Many e-tailers provide real-time sales and customer service that allow customers to enter a live chat room with a service operator who can answer their specific product questions.

Video retailing, a long-established form of interactive marketing, lets viewers shop at home from channels on their TVs. QVC, for example, displays and demonstrates products, allows viewers to phone in or e-mail orders, and is available on Facebook, YouTube, and Twitter. Current generation televisions are available with online capabilities as well, allowing online networking. A television with Wi-Fi network access thus becomes a platform for comfortable at-home online shopping with a large-screen visual display.

A photo of chef Wolfgang Puck is preparing food during a live show.

Wolfgang Puck products are distributed regularly through QVC and HSN television networks. The chef’s name-brand kitchen appliances and cookware are also marketed through such ­online outlets as eBay and Shopping.com, as well as the QVC and HSN websites.

James Atoa/Everett Collection

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