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Marketing Basics - Kotler Philip

The nature of the retail space

CHARACTER OF TRADING ROOM . Although the vast majority of goods and services are still sold in stores, out-of-store retail outstrips the store by the growth rate. In 1977, non-store retail sales reached $ 75 billion, or 12% of all consumer purchases. According to some experts, by the end of the century, non-store retail will account for one third of all retail trade in mixed goods15. Others are predicting an increase in part-time retail, where consumers will order goods using their home computers and receive purchases without going to the store16. In this section, we will consider four forms of non-store retail: retail trade with the order of goods by mail or telephone, vending machines, discounted order services, as well as peddling and selling at home during “trade meetings”.

Retail trade with the order of goods by mail or by phone. Retail trade with ordering goods by mail or telephone means any sales activity using postal channels or telephone lines to collect orders and / or facilitate the delivery of goods sold. The postal trading system arose at a time when customers began to send their orders to manufacturers or merchants by mail. After the Civil War, merchants tried to stimulate the flow of consumer orders by sending catalogs, primarily to residents of rural areas. In 1872, the Montgomery Ward trading company arose in Chicago, and 14 years later, the Sears Roback firm. By 1918, these two companies had turned into giants of the post-trade, selling catalogs, and in total there were already about 2,500 mail-order establishments in the country. In the 30s and 40s of our century, many retailers curtailed their post-trading operations, as small chain stores appeared in small towns and villages, the flow of goods to these settlements increased, and the number of cars increased and more roads appeared. However, even today, trade with orders of goods by mail or by phone is not only not in decline, but, on the contrary, is booming.

There are currently 11,000 post-trade enterprises in the United States ordering goods by mail or telephone, with a total annual turnover of over $ 8 billion. Retailing with mail or phone order takes several forms.

1. Trade with an order by catalog. Sellers usually send out catalogs to a select contingent of customers or provide the opportunity to receive them at their retail premises either for free or at a nominal price. This approach is practiced by mixed-assortment post-trade enterprises offering an exhaustive selection of products. The industry giant, Sirs, distributes 300 million catalogs annually and has an annual turnover of more than $ 3 billion.17 The next corporation, J. “C. Penny” annually sells over $ 1 billion in catalogs of goods. Among other things, these giant retailers have catalog sections in their stores, and in small towns there are special catalog bureaus in which the consumer can familiarize themselves with catalogs and issue an order. Ordered goods are shipped from central warehouses to these sections or bureaus, from where the consumer is notified by telephone that the order has arrived and can be received. Recently, specialized department stores such as Neumann-Marcus and Saks on Fifth Avenue have begun to distribute catalogs in order to actively shape the market for upper middle class consumers for such expensive and often exotic goods as bathrobes “for him and for her” , jewelry of individual design, various dishes for gourmets (see Box 32).

2. Direct marketing. A direct marketing agent sometimes advertises in a newspaper, magazine, on radio or television with a description of a product that consumers can order by mail or telephone. To place such ads, he chooses those means of advertising that will ensure the receipt of the largest number of orders in the framework of the allocated advertising appropriations. Such a strategic approach works well for products such as phonograph records, tape, books and small household appliances.

3. “Direct mail”. Direct marketing agents often send mail - letters, leaflets, prospectuses - to potential customers, whose names are listed on special mailing lists of the most likely buyers of goods of one or another category. Mailing lists are purchased from specialized brokerage suppliers. Direct mail advertising proved to be very effective in promoting books, magazine subscriptions and insurance. In addition, they increasingly resort to it when organizing the sale of new products, clothing and even food products for gourmets. The country's main charitable organizations annually raise $ 21.4 billion, or over 80% of all donations received by them through direct mail. 18
4. Telephone sales. Direct marketers are increasingly using the telephone to sell anything from home repair services to subscribing to newspapers and membership in friends of zoos. Some telephone marketing practitioners have developed computer-based systems that automatically dial numbers and send messages stored in computer memory to households.

The growth of trade with the order of goods by mail or by telephone was facilitated by several factors. With the increasing number of women at work, the time they can spend in stores has been drastically reduced. For several reasons, the shopping process itself has become less enjoyable: the cost of traveling by car has increased; it became difficult to overcome traffic congestion, and even more difficult to find a parking space; shoppers shifted to the suburbs and avoided crime-ridden urban shopping areas; people are uncomfortable with the lack of sales workers in stores and the need to queue at billing centers. In addition, many store chains refused to sell specialized time-selling products, thereby providing the opportunity to offer these products to direct marketing figures. And finally, the emergence of telephones that customers can call for free for themselves, as well as the willingness of direct marketing establishments to take orders over the phone at night or on Sundays, have made this form of retailing very popular.

Box 32. A shopping catalog is a home-based store.

One form of retail gives consumers the ability to buy almost anything without going to the store. An increasing number of retailers are selling any goods that you can imagine using the trade catalogs of the postal bargain.

According to such catalogs you can order from the company “I. I. Bean "his own" lumberjack boots with a sheepskin lining, Victorias Secret has a tantalizing nightgown, Harry and David has the most popular fruits of the month, Pfelzer Collection has a dairy tenderloin veal. If none of these products touch your imagination, there are many others. What can you say about the Corvette car, made in one-third of its life size, about a completely inconspicuous device for cleaning toilets, a personalized, precisely sized collar for a dog or other pet, or a robot that can play chess? After all, you can order all this.

According to a recent study, the volume of trade in catalogs is growing at about 15% annually, while the volume of trade through stores is only 3%. In 1982, over 5 billion catalogs were sent to American consumers. In other words, an average of 40 pieces were squeezed into the mailbox of an average American household.

Buying and selling catalogs creates certain benefits for both the consumer and the seller. Despite the fact that more than half of American women are currently working, the majority of purchases made in the country are still women. Buying from a catalog, that is, not getting up from your chair, saves time and effort compared to shopping directly at the store, especially for those who are tight with time. For retailers, this method means reducing labor costs, reducing overhead and almost completely preventing theft.

However, the success of an institution selling catalogs depends entirely on the quality of mailing lists at its disposal. Many retailers get the best results when they ship their items to residents of high-income areas. The United States Census Bureau has lists, the full set of which costs about $ 250 thousand, indicating the postal indexation of the country's regions and the average income level in each of these regions. Having such a list, the retailer can always choose the areas of distribution of catalogs of interest to him on the basis of income level indicators.

Some merchants even offer a sort of catalog version of storefronts when a consumer views colorful images of flashy luxury items at fabulously high prices. One company invites you to reserve a seat on your first commercial flight on a reusable spacecraft, another offers you to buy real “Russian mountains” made entirely of wood for $ 2,430,000. The Neumann-Marcus department store offers separate planes “for him and for her” , and one store even offered for sale a bathtub filled to the brim with diamonds. If you want, from the catalog you can order almost everything - from the cheapest utilitarian essentials to the most extravagant trinkets, trifles and trinkets.

Vending machines. In the post-war years, trade through vending machines grew at a particularly fast pace, the turnover of which in 1980 grew to 13.8 billion dollars, which is 1.5% of the total retail turnover. Selling through vending machines is not a new thing. One study provides a reference to a book dated 215 BC. e., which describes the Egyptian coin device that dispensed sacrificial water19. In the 80s of the last century, Tutti-Frutti began to install the first chewing gum machines at railway stations. Today's machines have far gone from their predecessors, embodying in their design the achievements of space and computer technology. They can accept coins or banknotes and issue change. Through vending machines, they began to sell a wide variety of goods, including consumer goods of impulse purchase (cigarettes, soft drinks, sweets, newspapers, cold and hot drinks) and other products (cosmetics, paperback books, phonograph records, film, t-shirts, insurance policies, shoe polish and even fishing bait).

Vending machines are located in factories, institutions, in large stores, at gas stations and even in railway dining cars. They belong, as a rule, to special firms that rent space in the most favorable places and are engaged in the maintenance of automatic machines. According to the National Association of Automatic Trading, in the United States there are over 7 thousand specialized firms operating more than 6 million vending machines.

Vending machines provide consumers with convenience of round-the-clock sale and self-service, as well as reduce the possibility of purchasing damaged goods. At the same time, vending machines are a relatively expensive distribution channel, and the prices of goods sold through them are often 15–20% higher than usual. The seller’s costs are also high, since automatic machines scattered over a large territory require frequent replenishment of goods, often fail, and in some areas suffer from minor thefts. Consumers are mainly annoyed by breakdowns, untimely replenishment of vending machines with goods and the inability to return a purchase.

Discounted order service. The discounted order service assists marginalized groups of customers — typically workers and employees of large organizations, such as schools, hospitals, unions, and government agencies who purchase at discounted prices from a number of retailers selected for this purpose. A consumer who wants to purchase a VCR receives a special form from the order service with which he goes to a certain retailer and buys the goods at a discount. After this, the retailer usually pays a small commission to the order service. So, for example, the United Buying Service order service has 900 thousand members and gives them the right to make purchases at prices at “cost plus 8%”.

Trading peddling. This form of trade, which began many centuries ago by wandering peddlers, has now turned into an industry with a turnover of $ 6 billion a year. Today, more than 600 companies are engaged in peddling by the principle of “every door”, to each institution or by the principle of arranging trade meetings at home. One of the pioneers of this form of trade, Fuller Brush Company, still has about 10 thousand salespeople on its staff selling brushes, combs, mops and other products that it produces. Among the pioneers of peddling are sellers of vacuum cleaners from the Electrolux company, and sellers of the Bible, such as the company Southwest Company from Nashville. For many years, companies that have been practicing such trade are encyclopedia publishers. The leader among them was World Book, which attracts part-time school teachers specially trained by it to sell encyclopedias. The Avon company came up with its own idea - the idea of ​​"Lady Avon" - a friend and consultant to the housewife cosmetics house. Its “army” of 1,340,000 female salespeople in all parts of the world secured more than $ 3 billion worth of sales in 1982, turning Avon into the largest cosmetics company in the world and the world's largest peddler. In terms of the scope of its activities, Avon is several times superior to the two leading peddlers following it - the Electrolux and Tapperver firms. The Tapperver company promoted the popularity of “trade meetings” when the hostess of the house invites friends and neighbors to visit with whom the company’s products are displayed and sold. Today, Tapperver offers about 140 different products and works through 50 thousand independent dealers20.

Peddling meets the needs of people in terms of convenience and attention to their personality, inherent in buying at home. The prices of goods sold in this way cannot be called low, because peddling is an expensive enterprise in itself (the salesman commission makes up from 20 to 50% of the sales amount), not counting the costs of hiring, organizing work, and motivating sales staff. The future of this form of retail is rather uncertain. Given that most American households today are one or two families (both of whom are busy all day at work), the likelihood of finding someone at home in the daytime is reduced. And with the further spread of telecommunications technology, a salesman selling peddles can perhaps completely replace a household computer.