Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

13. Retailers, Wholesalers
    and Their Strategy
    Planning

Text © The McGraw−Hill

Companies, 2002

366 Chapter 13

attention. It is also growing in popularity in some international markets, like

China, where it provides salespeople with a good income. In the U.S., it now

accounts for less than 1 percent of retail sales. It’s getting harder to find someone

at home during the day.

On the other hand, time-pressured dual-career families are a prime target market for

telephone and direct-mail retailingthat allow consumers to shop at home—usually

placing orders by mail or a toll-free long-distance telephone call and charging the pur-

chase to a credit card. Typically, catalogs and ads on TV let customers see the offerings,

and purchases are delivered by UPS. Some consumers really like the convenience of

this type of retailing—especially for products not available in local stores.

This approach reduces costs by using computer mailing lists to help target specific

customers and by using warehouse-type buildings and limited sales help. And shoplift-

ing—a big expense for most retailers—isn’t a problem. After-tax profits for successful

mail-order retailers average about 7 percent of sales—more than twice the profit

margins for most other types of retailers. However, with increasing competition and

slower sales growth, these margins have been eroding. As we will discuss, however,

the Internet is opening up new growth opportunities for many of these firms.^17

QVC, Home Shopping Network, and others are succeeding by devoting cable

TV channels to home shopping. Some experts think that the coming explosion in

the number of available cable channels and interactive cable services will make sales

from this approach grow even faster. In addition, QVC has opened a major website

on the Internet. However, selling on the Internet is turning into something much

more than just a variation of selling on TV or from a catalog.^18

Put the catalog on
cable TV or computer

Many retailers are looking for
ways to make shopping faster
and more convenient. With
Mobil’s SpeedPass system, a
miniature electronic device
identifies the driver and turns on
the pump; the customer doesn’t
even need a credit card.

Retailing on the Internet

Until now, as we’ve talked about the evolution of retailers and the varied ways

they have innovated to respond to consumer demand and meet needs, we’ve not

devoted much attention to retailing on the Internet. It’s reasonable to ask why. As

we said earlier, Wal-Mart and other mass-merchandisers now sell on the Web, so

one could view that development as just another aspect of how low-margin mass-

merchandisers are trying to appeal to a large target market with wide (or deep)

assortments of products at discount prices. Or one might view the Internet as just

another way to add convenient in-home shopping, with an electronic catalog and

ordering on a remote computer. After all, that’s the way most people saw earlier

pre-Internet dial-up systems such as Prodigy—a joint venture between Sears and

IBM that fizzled because it was too complicated.