Lecture #1: Introduction to Retailing

These lecture notes are provided as a study aid in preparation for examinations. Students should review their class notes, and compare to the outline presented below. To assist in reviewing for exams, students are advised to rewrite their notes in accordance with the outline.

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Welcome to Retailing!

Retailing consists of all those activities associated with the sales of goods and services to final consumers. It is the most visible aspect of the Marketing process, for it is with retailers that consumers interface on a regular basis. Consider this: how long has it been since you purchased something from a retailer of any kind? It is difficult to go through just one day without making a retail purchase.

Retailers can be classified very broadly as goods retailers (sellers of tangible products) or services retailers (sellers of intangible services), although in these days of scrambled merchandising and product augmentation, there is a great deal of blurring, so that modern retailers are often a hybrid of the two.

Retailing has evolved to the point where some stores are viewed as destinations in and of themselves, with much more consumer value than just the products or services they sell. For example, The Rainforest Cafe is a tourist attraction as much as it is a diner. The Warner Brothers Store in The Mall of Florida (Orlando area) is also an attraction. Even the outlet stores along International Drive in Orlando are tourist attractions.

Retailing is in a state of rapid change, with the advent of the Internet. Online shopping brings the "store" right into people's living rooms, in living color. Take for example amazon.com and cdnow.com, two large Internet-only retailers of books and CDs, respectively. These two entities did not exist before the mid-1990s, but now command a significant share of market.

Adding to the evolutionary fervor is the increasing savviness of consumers. When it comes to buying a car, many consumers enter the dealership armed with data they downloaded from the Internet. Saturn even allows customers to print out an official window sticker with the price of the car for whatever options they want.

The composition of retail sales will likely change in the years ahead, however. Currently about 1 of every 6 dollars spent in retail is in a non-store setting, but some analysts expect that number to surpass even 50-percent!! In other words, it is entirely possible that consumers will conduct over one-half of their shopping without setting foot in a store.

But, truth be known, people still prefer to shop in brick-and-mortar establishments, even if they often voice their dismay about doing so. While nonstore retailing will likely continue to grow in the years ahead, instore retailing will always be around as the most potent force.

What is a Retailer?

The retailer is the last step in the distribution of goods and services to final consumers. He may or may not be preceded by a wholesaler or agents and brokers, but is always preceded by the manufacturer. As noted in the text, numerous large retailers have practiced backward vertical integration as they develop their own warehousing facilities. Wal-Mart, for example, has an impressive network of distribution centers that serve stores in various geographic areas. Wal-Mart has effectively cut out the wholesaler, because they buy everything directly from manufacturers, and usually in large volumes.

The Functions Performed by Retailers

Retailers provide a variety of functions for consumers, manufacturers, and society in general. They include:

1. Providing an assortment of goods from a variety of manufacturers. They bring together the selected outputs of many producers, giving consumers greater convenience and selection.
2. They break bulk, enabling consumers to buy in quantities that they need.
3. They hold inventory. This keeps the pipeline filled, and consumers happy. Of course, this is a two-edged sword, for holding inventory can become the bane of an retailer's existence. The trick is to have the right product, in the right amount, in the right place, at the right time. This is no small feat!
4. Services, such as delivery, credit, installation, expert advice.