Chapter 1: Retail Marketing

Question 1

retailing

Answer 1

Retailing is all activities that companies and organizations engage in that focus on the direct delivery of goods, services, and information through all available channels to consumers (end users), where the goods and services are paid for out of the net income of consumers.

Question 2

transaction cost theory

Answer 2

The Transaction-cost Theory can explain these changes in the function of retail because the shift in power from the producer to the consumer, is no longer a matter of minimizing 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.

Question 3

The consumer’s transaction costs consist of

Answer 3

● Costs of buying items (searching, finding, buying, and transporting)
● Costs of proceeds: the pleasure that can be had from shopping and buying products or services

The consumer will choose the supplier where the balance of costs and revenues is most favorable.

Question 4

transaction-cost matrix

Answer 4

Horizontal axis = possibilities under the ‘old economy’ (before the internet);
Vertical axis = situations in the new economy (after the internet).

Question 5

1) Threatened bricks-and-mortar retail (upper right)

Answer 5

• This is the situation that bricks-and-mortar retail should be most concerned about. In time, these shops will see their revenue decline in favor of the market share of e-retailers but also within the composition of their own sales.
• The extent to which information is embedded in a product or service, the extent to which it is digitized, plays an important role!
  ○ For example, the physical distribution of music or video plays has largely disappeared
  ○ But also, cars, kitchens or furniture are in danger (most of the buying process also consists of the processing of information)

Question 6

2) Empowering direct marketers (upper left)

Answer 6

• Poses a less direct threat to retail. After all, this revenue was not in the retail sector anyway.
• However, the relative position of direct marketers and the technical possibilities open to them are becoming stronger because of the internet. This will allow them to increase their market share at the expense of bricks-and-mortar retail (as information intermediaries)

Question 7

3) Domain of pure players: clicks and orders (lower left)

Answer 7

• New opportunities arise for retail-distribution systems that offer goods over the internet or try to match up supply and demand, for example, Amazon and eBay

Question 8

4) Multi-channel providers: clicks and bricks (lower right)

Answer 8

• Hybrid companies that start an internet sales channel from bricks-and-mortar retail, or pure players that build physical shops based on an existing internet channel, or even manufacturers that will span the entire spectrum. For example, Apple
• Zalando & Coolblue are the opposite kind: it is an e-tailer that also opens bricks-and-mortar retail premises

Question 9

Analysis of developments based on the transaction-cost matrix

Threatened retail

Answer 9

Threatened retail (upper right): will in certain sectors lose market share to internet retailers.

The choice is then between
- Continuing what you’re doing → and thus experiencing further pressure on revenue
- Adapting: in this case you should make significant investments, which puts pressure on profitability

Question 10

Analysis of developments based on the transaction-cost matrix

pure players

Answer 10

Pure players (lower left): do not have an easy time either. There are two reasons:
- Marketing costs: it takes a lot of time, effort and money to attract visitors to the website. This results in high marketing costs, and also: winner-takes-all principle applies even more online
- Fulfilment costs: costs for the entire logistical transaction (not only deliver, also return costs)

Question 11

Analysis of developments based on the transaction-cost matrix

The multichannel - or omnichannel

Answer 11

The multichannel - or omnichannel - providers seem to be in a better position!

Question 12

The Institute of Marketing Studies (2002) uses this definition of marketing:

Answer 12

“Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably”

Question 13

Based on the value chain, we distinguish:

Answer 13

• Trade marketing: focuses on sales by producers to wholesalers and retailers in the merchandise sector.
• Retail marketing: Focuses on sales by retailers to end users.

Question 14

in retail, visitors who enter the store do not always leave as customers. Therefore, in retail the marketing mix consists of two parts:

Answer 14

1. The external marketing mix which is focused on creating interest in the formula (focuses on brand awareness, the image of the formula, creating appeal) and consists of 5Ps - people, product, place, price, and promotion.
2. The internal marketing mix which is focused on transforming that interest, once it has been created, into actual buying behavior (focuses on the effectiveness of the outlet as a sales machine) and consists of 4Ps - presentation, physical distribution, people and productivity,