RETAIL MARKETING
// CH1 //
Retail: the part of total economic activity that deals with the sale of goods directly
to consumers.
Retailing: all business management activities that focus on direct sales of goods
and services to consumers, provided that these goods/services are paid out of the
consumers’ net income.
Direct marketing: direct deliveries to the consumer. (so no intermediate companies
perform direct marketing)
Retail expenditures:
- Expenditure on services by consumers, such as banking services,
insurance, medical services and leisure trips.
- Expenditure on goods by consumers. Takes primarily place through retail, so
the totality of this expenditure is called retail expenditure.
The old function of retail was to distribute the flow of goods from
manufacturer to consumer by time, location and quantity:
- Redistribution in time → bridging the period between completion
of the production by the manufacturer and the date of purchase by
the consumer, often caused by irregularities between demand and
production (e.g. seasonal fluctuations).
- Redistribution to location → geographic function, usually not the
same as place of consumption.
- Redistribution in quantity → solving the differences between the
output quantities with the manufacturer and the input quantities
with the consumer (manufactures 100 pieces, consumer only wants
2).
Over time, power has gradually shifted from retail suppliers to retail customers, which caused the transition
from a seller’s market to a buyer’s market. Supply on demand is now an important retail aspect. The
emergence of retail as a separate section in the business chain can be linked back to economic transaction
cost theory (i.e. economies of scale).
Retail used to be part of a ‘goods producing process’ but has now moved to ‘demand satisfying process’,
because of the shift of power from manufacturer to consumer (it’s no longer about minimizing cost but
about satisfying customer).
Transaction Costs:
Retails has the right to exist if T1 > (T2+T3)
- T1 = costs involved in the direct distribution
from manufacturer to consumer.
- T2 = costs involved in the supply from
manufacturer to retailer.
- T3 = costs involved in the supply from
retailer to consumer.
Marketing mix: the element with which the retailer responds to the consumers’ needs.
1
,Wholesale dealers: person who buys in bulk from manufacturers and sells to retailers.
Retailers have the task to combine products from the same business chains such to arise the Demand-
related product range (:product range tailored to the broad consumer needs). It no longer revolves around
selling products that are present in the market, but also providing products that clients demand, if needed
by private labels (:developing and producing own retail brands).
Forward integration: business activities are expanded to include
control of the direct distribution or supply of a company's
products. (from manufacturer to consumer)
Backwards integration: consumer of raw materials acquires its
suppliers or sets up its own facilities to ensure a more reliable or
cost-effective supply of inputs.
Marketing costs: e.g. due to unfamiliarity of the consumer with new products, it takes a lot of effort, time
and money to attract potential customers.
Fulfillment costs: cost associated with a particular service that relates to the order fulfillment process, such
as receiving, inventory storage, order processing (pick/pack), and returns processing.
Retail marketing: focuses on the sales from retailers to the final consumer.
Consumer marketing: all marketing efforts aimed at the satisfaction of the final consumer.
Differences in Retail marketing vs. Trade marketing:
Characteristic: Retail Marketing: Trade Marketing:
Supply chain Horizontal Vertical
Business process Demand driven Product driven
Target group Anonymous Known
Product range Wide/ very wide Small
Demand relationship Assortment driven Product driven
Place Consumer leading Costs leading
Expansion Once-off Rearrangement
Price Surcharge calculation Cost price calculation
Promotion Store oriented Product oriented
Marketing mix 9P’s: +Public, Presentation, 4P’s: Product, Price, Promotion
Personnel, Physical distribution, and Place
Productivity
Purchase Primary activities Support activities
Time horizon Short term Long term
Marketing function Purchase Sale
Returns criteria Return on sales Return on investment
Store concept: a balanced composition of the marketing mix, such that a distinctive store image originates
for the consumer.
2
, Outlet channel: retail itself is the outlet channel.
External marketing mix: aims at generating interest Internal marketing mix: aimed at converting the
for the formula. generated interest into actual purchase behaviour.
- Product - Presentation
- Public - Personnel
- Place - Physical distribution
- Price - Productivity
- Promotion
Cost price calculation: a profit margin is imposed on the calculated cost price.
Surcharge calculation: toeslag; the purchase price has a surcharge applied.
- The retailer does not know in advance whether the applied surcharge will be sufficient to cover his
costs.
- Purchase price of €10 with a surcharge of 100% results in a sales price of €20.
Marketing is the management process responsible for identifying, anticipating and satisfying customer
requirements profitably.
Multichannel marketing: users are able to use different channels to communicate and purchase from a
company, (Ex: Computer, In-person, and telephone) but the channels are disconnected and completely
separate.
Cross-channel marketing: the different channels of communication are connected together. This means
that different channels record and communicate information between them, allowing customers to "cross
over" between different channels relatively seamlessly during the buyer’s journey.
- E.g. you receive an e-mail with a survey after shopping in-store, and you get rewarded a 20% coupon for
filling out the survey, which you can redeem online (enter the code) or at a physical store (code gets scanned
by store representative) at your next purchase.
Retail Forms and Suppliers:
Depositary: distributor/agencies; often companies that offer a limited product line from a single supplier.
Generalists: businesses that offer both a very wide and very deep product range (e.g. supermarkets).
3
