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Retail Marketing
Lecture 1: The Retail Industry
Retail marketing = All activities from companies and organizations that focus on the direct
delivery of goods, services and information through all available channels to consumers, where
the goods and services are paid out of the net income of consumers.
• Providing information is a very important part of the business model. Information is
important to make your decision (value). For the goods and services businesses get paid
but for the information they give, they don’t get paid.
Direct sales: goods and services are sold directly to the consumer without the intervention of
an intermediary.
As long as Albert Heijn is selling products to the end user, there’s nobody in between.
When Unilever sells products, they are using companies like Amazon, Albert Heijn to sell their
products to the end user. Although sometimes they are selling directly: ‘’brands go retail’’ e.g.,
magnum store (Unilever) becoming a retailer e.g., Lego opening their own store.
Brands go Retail examples: Apple store, H&M, Nike store, Lexus: restaurant and providing
information (cars), Dolce & Cabana (personalized shoes at the store).
What is retail?
• Retail expenditures on services by consumers: financial services (bank giving you a
loan), communication services, travel and entertainment.
• Retail expenditures on goods by consumers: including goods which can be consumed
immediately.
What is retail trade?
Goods – retailing = That part of the total economic activity that deals with the sales of goods
and services directly to consumers.
Retail = that part of the total economic activity that is engaged in the direct supply of goods,
services and information to consumers.
Different forms of retail:
• Stores
• Online retail
• Market trade
• Door-to-door sales
• House parties
• Vending machines
• Social commerce.
,Business Chain
*Retailers are at the bottom
of the business chain
Direct Retail Environment
Overtime things started changing →
Manufactures: some of them started
selling directly to the end consumers.
At the beginning they were doing this
by wholesale dealers.
,Value web
Consumers can even sell products to each other. Everybody is becoming a retailer, everybody
is selling directly to end user.
The value web is a network of connections in which the consumer has emerged as the central
demand side, situated among all kinds of providers. Rather than a single network, there are
severals that are connected.
Retail in the economic theory
Transaction cost theory: because of the shift in power from the producer to the consumer, it
is no longer a matter of minimising costs within the value chain from the producer’s point of
view, but of minimizing the consumer’s problems in finding or looking for a product and the
transaction costs associated with this.
Consumer’s transaction costs consist of two parts: costs associated with buying items:
searching, finding, buying, transport, proceeds: the pleasure that can be had from shopping
and buying products or services.
Explaining the diagram: retail comes into existence only if the transaction costs involved in
the producer’s supplying the consumer directly are higher than the sum of the costs involved
in the producer’s supplying the retailer on the one hand and the retailer supplying the
consumer on the other.
Looking at the transaction cost theory: Retail can survive as long as this process is cheaper than
doing it directly.
, Everything is becoming digital, so only for the missing information you can go to the store
(you can buy the product anywhere).
Willing to buy something online, even it is a bit more expensive (because of the time saving
factor).
Transaction-cost matrix
• Upper-right quadrant: threatened bricks and mortar retail
• Upper-left quadrant: empowering direct marketers → allow them to increase their
market share at the expense of bricks-and-mortal retail, more and more new players
enter this field
• Lower-left quadrant: the domain of pure players (clicks and order)
• Lower-right quadrant: the multi-channel providers (clicks and bricks) →hybrid
companies that start as an internet sales channel from bricks and mortar retail, or pure
players that build physical shops based on an existing internet channel.
The traditional retail function:
• The art of distribution
• Re-allocation of the flow of goods: time, place (place of production is barely the same
as the place of consumption), quantity
• Part of the goods producing process → manufacturer produced products (1)
• Product push → these products were kind of pushed through the business chain (2)
• Seller’s market → to the final customer (3)
Current retail function:
• Shifting power towards consumer: buyer’s market
• Compose range of demand-related products that meet consumer needs
• Demand satisfying process
• Demand pull
• Today it’s buyer’s, consumer market: we are in charge =- demand satisfying process
• Moving from product push to demand pull
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