ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
What is your favorite retailer? Why do you like this retailer? What would a competitive retailer have to do to get your patronage? Students may choose an example from a wide variety of retailers. Answers will likely range from national chains including but not limited to K-Mart, The Gap, Bloomingdale's, McDonald's, The Sports Authority, Starbucks, JC Penney, to online retailers like Amazon.com and eBay to favorite local shops and hangouts.
Whatever selection is made, ask students to concentrate on the specific aspects of retail strategy, such as: (1) intended target market of the retailer; (2) nature of merchandise and services and the specific consumer needs sought to be satisfied; (3) product variety and assortments carried; (4) store location strategy; (5) pricing strategies; (6) specific service strategies; (7) strategies designed to attract and retain customers; and, (8) strategies specifically designed at gaining a long-term advantage over competitors. From your perspective, what are the benefits and limitations of purchasing a home entertainment system directly from a number of component manufacturers rather than from a retailer? Students may indicate benefits typically associated with “removing the middleman” such as reduced price and effort in completing the transaction. While these benefits will occur in specific cases, it must be noted that the average consumer engages in buying dozens of items on a regular basis. Even if all manufacturers were to offer their products directly to consumers, it can be readily noted that the consumer would now have to spend an extraordinary amount of time each day ordering directly from each manufacturer. This should lead to discussion of the limitations of purchasing directly from the manufacturer rather than a retailer. Here, the various functions performed by retailers, such as bulk-breaking, holding inventories, and providing information, service and assortments can be brought to bear on overcoming the limitations discussed above for the consumer. Bulk-breaking enables consumers to buy only the specific amount they would need. Retail inventory helps eliminate the need for consumers to hold their own inventory, since they could simply satisfy their needs for a specific and immediate time-period, such as buying one unit of dish washing detergent that would last the next 2 months. Retailers provide valuable information and services that save consumers time and effort as compared to when consumers attempt to obtain such information by themselves or serve themselves. By providing an assortment of products and brands in one location – in some cases of scrambled merchandising, a very wide assortment of products and brands – retailers help consumers engage in one-stop shopping, thereby saving them the time and effort for other productive and leisure activities. Further, it would be uneconomical for most manufacturers, especially those selling low-priced items, such as toothpaste directly to each consumer or household. In general, even if retailers are eliminated from the supply chain, their functions remain. Often these functions would be distributed between the manufacturer and consumers. For example, manufacturers would now have to produce a wider variety of products (in order to offer an assortment) and consumers would have to carry greater amounts of inventory (to buy a case-load of toothpastes!). The distribution of retail functions would increase manufacturer costs as well as consumer costs and efforts. One may argue that "buying cheaper from the manufacturer" is, in a vast majority of cases, a myth. What retailers would be considered intratype competitors for a convenience store chain such as 7-Eleven? What firms would be intertype competitors? Discussion should lead to those convenience stores in the local market offering the traditional convenience store retail mix including gasoline, snacks, newspapers, coffee, and a...
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