Retailing and Direct Marketing

What is retailing? We all know that Addidde, Shoprites, Macy's, and Target are retailers, but
so are Avon representatives, Amazon.com, the local Hampton Inn, and a doctor seeing
patients. Retailing includes all the activities involved in selling products or services directly
to final consumers for their personal, non-business use. Many institutions: manufacturers,
wholesalers, and retailers; do retailing. But most retailing is done by retailers: businesses
whose sales come primarily from retailing.

Although most retailing is done in retail stores, in recent years non-store retailing has been
growing much faster than has store retailing. Non-store retailing includes selling to final
consumers through direct mail, catalogues, telephone, the Internet, TV home-shopping
shows, home and office parties, door-to-door contact, vending machines, and other direct-
selling approaches. We discuss such direct-marketing approaches in detail in Chapter 17. In
this chapter, we focus on store retailing.

Types of Retailers
Retail stores come in all shapes and sizes, and new retail types keep emerging. The most
important types of retail stores are discussed in the following sections.
They can be classified in terms of several characteristics, including the amount of service
they offer, the breadth and depth of their product lines, the relative prices they charge, and
how they are organized.

Major Store Retailer Types

Specialty Stores: This is a retail store that carries a narrow product line with a deep
assortment within that line, such as apparel stores, sporting-goods stores, furniture stores,
florists, and bookstores. A clothing store would be a single-line store, a men's clothing store
would be a limited-line store, and a men's custom-shirt store would be a super specialty store.
Examples: CMS bookshop in Broad Street Lagos.
Department Stores: This is a retail organization that carries a wide variety of product lines-
each line is operated as a separate department managed by specialist buyers or merchandisers.
Carry several product lines; typically clothing, home furnishings, and household goods; with
each line operated as a separate department managed by specialist buyers or merchandisers.
Examples: Just Rites in Nigeria.
Supermarkets: Large, low-cost, low-margin, high-volume, self-service store that carries a
wide variety of grocery and household products. A relatively large, low-cost, low-margin,
high-volume, self-service operation designed to serve the consumer's total needs for grocery
and household products. Examples: Ebiano Supermarket in Lekki, Shoprites Ikeja City Hall).
Convenience Stores: A small store, located near a residential area, that is open long hours
seven days a week and carries a limited line of high-turnover convenience goods. Relatively
small stores located near residential areas, open long hours seven days a week, and carrying a
limited line of high-turnover convenience products at slightly higher prices. Examples:
Ogunleye Stores, Finbarr’s Road and Best Choice Convenience Store University Road .

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Discount Stores: Carry standard merchandise sold at lower prices with lower margins and
higher volumes. Examples: Vitafoam Discount Shop at Oguntona Cresent, Unique Metro
Mart at Herbert Macauley Way.
Off-Price Retailers: Sell merchandise bought at less-than-regular wholesale prices and sold
at less than retail, often leftover goods, overruns, and irregulars obtained at reduced prices
from manufacturers or other retailers. These include factory outlets owned and operated by
manufacturers; independent off-price retailers owned and run by entrepreneurs or by
divisions of larger retail corporations; and warehouse (or wholesale) clubs selling a limited
selection of brand-name groceries, appliances, clothing, and other goods at deep discounts to
consumers who pay membership fees. Examples in Nigeria: Konga Retail Store, SPAR
Ilupeju, Jumia Ogunsanya Pickup Station, Wine House Nigeria at Bode Thomas).
Superstores: This is a store much larger than a regular supermarket that offers a large
assortment of routinely purchased food products, non-food items, and services. Very large
stores traditionally aimed at meeting consumers' total needs for routinely purchased food and
non-food items, Includes category killers, which carry a deep assortment in a particular
category and have a knowledgeable staff (examples: Trolleys Superstore in Industrial
Avenue, Justrite Superstore at Shomolu, Goodiss Superstors Ltd at Mobolaji Bank Anthony
Way);
Supercenters, combined supermarket and discount stores and hypermarkets with up to
220,000 square feet of space combining supermarket, discount, and warehouse retailing.
Category killer: Giant specialty store that carries a very deep assortment of a particular line
and is staffed by knowledgeable employees. They feature stores the size of airplane hangars
that carry a very deep assortment of a particular line with a knowledgeable staff. Category
killers are prevalent in a wide range of categories, including books, baby gear, toys,
electronics, home-improvement products, linens and towels, party goods, sporting goods,
even pet supplies.
Hypermarket: This is another superstore variation and it is a huge superstore, perhaps as
large as six football fields. Although hypermarkets have been very successful in Europe and
other world markets, they have met with little success in the United States.
Finally, for some retailers, the product line is actually a service. Service retailers include
hotels and motels, banks, airlines, colleges, hospitals, movie theatres, tennis clubs, bowling
alleys, restaurants, repair services, hair salons, and dry cleaners. Service retailers in the
United States are growing faster than product retailers.

Amount of Service
Different products require different amounts of service, and customer service preferences
vary. Retailers may offer one of three levels of service-self-service, limited service, and full
service.
Self-service retailers serve customers who are willing to perform their own, "locate-compare-
select" process to save money. Self-service is the basis of all discount operations and is
typically used by sellers of convenience goods (such as supermarkets) and nationally
branded, fast-moving shopping goods.
Limited-service retailers provide more sales assistance because they carry more shopping
goods about which customers need information. Their increased operating costs result in

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higher prices. In full-service retailers, such as specialty stores and first-class department
stores, salespeople assist customers in every phase of the shopping process. Full-service
stores usually carry more specialty goods for which customers like to be "waited on." They
provide more services resulting in much higher operating costs, which are passed along to
customers as higher prices.
Product Line
Retailers also can be classified by the length and breadth of their product assortments. Some
retailers, such as specialty stores, carry narrow product lines with deep assortments within
those lines. Today, specialty stores are flourishing. The increasing use of market
segmentation, market targeting, and product specialization has resulted in a greater need for
stores that focus on specific products and segments.
In contrast, department stores carry a wide variety of product lines. In recent years,
department stores have been squeezed between more focused and flexible specialty stores on
the one hand, and more efficient, lower-priced discounters on the other. In response, many
have added promotional pricing to meet the discount threat. Others have stepped up the use of
store brands and single-brand "designer shops" to compete with specialty stores. Still others
are trying mail-order, telephone, and Web selling. Service remains the key differentiating
factor. Retailers such as Shoprites, Addide, Justrite, and other high-end department stores are
doing well by emphasizing high-quality service.
Supermarkets are the most frequently shopped type of retail store. Today, however, they are
facing slow sales growth because of slower population growth and an increase in competition
horn discount food stores and supercenters on the one hand, and upscale specialty food stores
on the other. Supermarkets also have been hit hard by the rapid growth of out-of home eating.
In the US, supermarkets' share of the groceries and consumables market plunged from
percent in 1998 to 51 percent in 2005. Thus, many traditional supermarkets are facing hard
times.
Many supermarkets are making improvements to attract more customers. In the battle for
"share of stomachs," many large supermarkets are moving upscale, providing improved store
environments and higher-quality food offerings, such as from-scratch bakeries, gourmet deli
counters, and fresh seafood departments. Others are cutting costs, establishing more efficient
operations, and lowering prices in order to compete more effectively with food discounters.
Finally, a few have added Web-based sales. Today, one-quarter of all grocery stores sell their
goods online.
Convenience stores are small stores that carry a limited line of high-turnover convenience
goods. After several years of-stagnant sales, convenience stores are now experiencing healthy
growth in the U.S.
In recent years, convenience store chains have tried to expand beyond their primary market of
young, blue-collar men, redesigning their stores to attract female shoppers. They are shedding
the image of a "truck stop" where men go to buy beer, cigarettes, and magazines, and instead
offer fresh prepared foods and cleaner, safer, more upscale environments.

Superstores are much larger than regular supermarkets and offer a large assortment of
routinely purchased food products, non-food items, and services. Justrite Superstore Ltd,

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Trolleys Superstore, Yem-Yem Superstore, Magodo, and other discount retailers offer
supercenters, very large combination food and discount stores. Supercenters are growing in
the United States at an annual rate of 25 percent, compared with a supermarket industry
growth rate of only 1 percent.
Recent years have also seen the explosive growth of superstores that are actually giant
specialty stores, the so-called category killers. They feature stores the size of airplane
hangars that carry a very deep assortment of a particular line with a knowledgeable staff.
Category killers are prevalent in a wide range of categories, including books, baby gear, toys,
electronics, home-improvement products, linens and towels, party goods, sporting goods,
even pet supplies. Another superstore variation, a hypermarket, is a huge superstore, perhaps
as large as six football fields. Although hypermarkets have been very successful in Europe
and other world markets, they have met with little success in the United States.

Finally, for some retailers, the product line is actually a service. Service retailers include
hotels and motels, banks, airlines, colleges, hospitals, movie theatres, tennis clubs, bowling
alleys, restaurants, repair services, hair salons, and dry cleaners. Service retailers in Nigeria
are growing faster than product retailers.

2. Relative Prices
Retailers can also be classified according to the prices they charge. Most retailers charge
regular prices and offer normal-quality goods and customer service. Others offer higher-
quality goods and services at higher prices. The retailers that feature low prices are discount
stores and "off-price" retailers.
A discount store sells standard merchandise at lower prices by accepting lower margins and
selling higher volume. The early discount stores cut expenses by offering few services and
operating in warehouse like facilities in low-rent, heavily travelled districts.
Today's discounters have improved their store environments and increased their services,
while at the same time keeping prices low through lean, efficient operations. Leading
discounters, such as Wal-Mart, now dominate the retail scene.
As the major discount stores traded up, a new wave of off-price retailers moved in to fill the
ultralow-price, high-volume gap. Ordinary discounters buy at regular wholesale prices and
accept lower margins to keep prices down. In contrast, off-price retailers buy at less than
regular wholesale prices and charge consumers less than retail. Off-price retailers can be
found in all areas, from food, clothing, and electronics to no-frills banking and discount
brokerages.
The three main types of off-price retailers are independents, factory outlets, and warehouse
clubs. Independent off-price retailers either are owned and run by entrepreneurs or are
divisions of larger retail corporations. Although many off-price operations are run by smaller
independents, most large off-price retailer operations are owned by bigger retail chains.
Factory outlets-producer-operated-stores by firms such as Coca Cola, Thermocool, and
others-sometimes group together in factory outlet malls and value-retail centres, where
dozens of outlet stores offer prices as low as 50% below retail on a wide range of items.
Whereas outlet malls consist primarily of manufacturers' outlets, value-retail centers combine

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manufacturers' outlets with off-price retail stores and department store clearance outlets.
Factory outlet malls have become one of the hottest growth areas in retailing. The malls now
are moving upscale-and even dropping "factory" from their descriptions narrowing the gap
between factory outlet and more traditional forms of retailers. As the narrows, the discounts
offered by outlets are getting smaller.
Warehouse clubs (or wholesale clubs or membership warehouses), such as Club Quilox at
Ozumba Mbadiwe Rd, Lavenda Night Club at Adeniran Ogunsanya, Caribbean Knights Club
at Opebi Rd; Club DNA Lagos at Adetokunbo Ademola, and Club 57 at Awolowo Road,
operate in huge, drafty, warehouse-like facilities and offer few frills.
Customers themselves must wrestle furniture, heavy appliances, and other large items to the
checkout line. Such clubs make no home deliveries and often accept no credit cards.
However, they do offer ultralow prices and surprise deals on selected branded merchandise.
There is no statistics available in Nigeria about the revenue of these retail outlets however,
they account for only about 8 percent of total U.S. retail sales, warehouse clubs have grown
rapidly in recent years. These retailers appeal not just to low-income consumers seeking
bargains on bare-bones products; they appeal to all kinds of customers shopping for a wide
range of goods, from necessities to extravagances.

3. Organisational Approach

Although many retail stores are independently owned, others band together under some form
of corporate or contractual organization. The major types of retail organizations are;
corporate chains, voluntary chains and retailer cooperatives, franchise organizations, and
merchandising conglomerates.
Chain stores are two or more outlets that are commonly owned and controlled. They have
many advantages over independents. Their size allows them to buy in large quantities at
lower prices and gain promotional economies. They can hire specialists to deal with areas
such as pricing, promotion, merchandising, inventory control, and sales forecasting.
The great success of corporate chains caused many independents to band together in one of
two forms of contractual associations. One is the voluntary chain-a wholesaler-sponsored
group of independent retailers that engages in group buying and common merchandising. The
other type of contractual association is the retailer cooperative-a group of independent
retailers that bands together to set up a jointly owned, central wholesale operation and
conducts joint merchandising and promotion efforts.
These organizations give independents the buying and promotion economies they need to
meet the prices of corporate chains.
Another form of contractual retail organization is a franchise. The main difference between
franchise organizations and other contractual systems (voluntary chains and retail
cooperatives) is that franchise systems are normally based on some unique product or service;
on a method of doing business; or on the trade name, goodwill, or patent that the franchiser
has developed. Franchising has been prominent in fast foods, health and fitness centers,
haircutting, auto rentals, motels, travel agencies, real estate, and dozens of other product and
service areas.

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But franchising covers a lot more than just burger joints and fitness centers franchises have
sprung up to meet about any need.
Once considered upstarts among independent businesses, franchises now command 40% of
all retail sales in the United States. These days, it's nearly impossible to stroll down a city
block or drive on a suburban street without seeing a McDonald's, Subway, Jiffy Lube, or
Holiday Inn. One of the best-known and most successful franchisers, McDonald's, now has
nearly 32,000 stores in 119 countries. It serves nearly 50 million customers a day and racks
up more than $39 billion in annual system wide sales. Some 58% of McDonald's restaurants
worldwide are owned and operated by franchisees. Gaining fast is Subway Sandwiches and
Salads, one of the fastest-growing franchises, with more than 26,000 shops in 85 countries,
including over 20,000 in the United States.
Finally, merchandising conglomerates are corporations that combine several different
retailing forms under central ownership.

Retailer Marketing Decision

Retailers must make certain decisions because they are always searching for new marketing
strategies to attract and hold customers. The decisions include:

Target Market and Positioning Decision

Retailers must first define their target markets and then decide how they will position
themselves in these markets: Should the store focus on upscale, midscale, or downscale
shoppers?
Do target shoppers want variety, depth of assortment, convenience, or low prices? Until they
define and profile their markets, retailers cannot make consistent decisions about product
assortment, services, pricing, advertising, store decor, or any of the other decisions that must
support their positions.
Product Assortment and Services Decision

Retailers must decide on three major product variables: product assortment, services mix, and
store atmosphere. The retailer's product assortment should differentiate the retailer while
matching target shoppers' expectations. One strategy is to offer merchandise that no other
competitor carries, such as private brands or national brands on which it holds exclusives.
The services mix can also help set one retailer apart from another. For example, some
retailers invite customers to ask questions or consult service representatives in person or via
phone or keyboard.
The store's atmosphere is another element in the reseller's product arsenal. Every store has a
physical layout that makes moving around in it either hard or easy. Each store has a "feelly
one store is cluttered, another cheerful, a third plush, a fourth sombre. The retailer must
design an atmosphere that suits the target market and moves customers to buy.
Price Decision

A retailer's price policy must fit its target market and positioning, product and service
assortment, and competition. All retailers would like to charge high markups and achieve

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high volume, but the two seldom go together. Most retailers seek either high markups on
lower volume (most specialty stores) or low markups on higher volume (mass merchandisers
and discount stores).
Promotion Decision

Retailers use any or all of the promotion tools-advertising, personal selling, sales promotion,
public relations, and direct marketing-to reach consumers. They advertise in newspapers,
magazines, radio, television, and on the Internet. Advertising may be supported by newspaper
inserts and direct mail. Personal selling requires careful training of salespeople in how to
greet customers, meet their needs, and handle their complaints. Sales promotions may include
in-store demonstrations, displays, contests, and visiting celebrities. Public relations activities,
such as press conferences and speeches, store openings, special events, newsletters,
magazines, and public service activities, are always available to retailers. Most retailers have
also set up Web sites, offering customers information and other features and often selling
merchandise directly.

Place Decision
Retailers often point to three critical factors in retailing success: location, location, and
location! It's very important that retailers select locations that are accessible to the target
market in areas that are consistent with the retailer's positioning. For example, Apple locates
its stores in high-end malls and trendy shopping districts-such as the "Miracle Mile" on
Chicago's Michigan Avenue or Fikh Avenue in Manhattan-not low-rent strip malls on the
edge of town. Small retailers may have to settle for whatever locations they can find or
afford.
Large retailers, however, usually employ specialists who select locations using advanced
methods.
Most stores today cluster together to increase their customer pulling power and to give
consumers the convenience of one-stop shopping. Central business districts were the main
form of retail cluster until the 1950s. Every large city and town had a central business district
with department stores, specialty stores, banks, and movie theaters. When people began to
move to the suburbs, however, these central business districts, with their traffic, parking, and
crime problems, began to lose business. Downtown merchants opened branches in suburban
shopping centers, and the decline of the central business districts continued. In recent years,
many cities have joined with merchants to try to revive downtown shopping areas by building
malls and providing underground parking.
A shopping center is a group of retail businesses planned, developed, owned, and man-
A group of retail businesses aged as a unit. A regional shopping center, or regional shopping
mall, the largest and most planned, developed, owned, dramatic shopping center, contains
from 40 to over 200 stores. It is like a covered mini-down and managed as a unit. town and
attracts customers from a wide area. A community shopping center contains between 15 and
40 retail stores. It normally contains a branch of a department store or variety store, a
supermarket, specialty stores, professional offices, and sometimes a bank. Most shopping
centers are neighborhood shopping centers or strip malls that generally contain between 5 and

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15 stores. They are close and convenient for consumers. They usually contain a supermarket,
perhaps a discount store, and several service stores-dry cleaner, self-service laundry,
drugstore, video-rental outlet, barber or beauty shop, hardware store, or other stores.
A recent addition to the shopping center scene is the so-called power center. These huge
unenclosed shopping centers consist of a long strip of retail stores, including large,
freestanding anchors

Wheel-of-retailing concept A concept of retailing that states that new types of retailers
usually begin as low margin, low-price, low-status operations but later evolve into higher-
priced, higher service operations, eventually becoming like the conventional retailers they
replaced.

Growth of Nonstore Retailing

Most of us still make most of our purchases the old-fashioned way: We go to the store, find
what we want, wait patiently in line to plunk down our cash or credit card, and bring home
the goods. However, consumers now have an array of alternatives, including mail-order,
television, phone, and online shopping. Americans are increasingly avoiding the hassles and
crowds at malls by doing more of their shopping by phone or computer. Although such
retailing advances may threaten some traditional retailers, they offer exciting opportunities
for others.
Most store retailers have now developed direct-retailing channels. In fact, more online
retailing is conducted by "click-and-brick" retailers than by "click-only" retailers. In a recent
ranking of the top 50 online retail sites, 35 were multichannel retailers.
Online retailing is the newest form of nonstore retailing. Only a few years ago, prospects for
online retailing were soaring. As more and more consumers flocked to the Web, some experts
even saw a day when consumers would bypass stodgy "old economy" store retailers and do
almost all of their shopping via the Internet. However, the dot-com meltdown of 2000 dashed
these overblown expectations. Many once-brash Web sellers crashed and burned and
expectations reversed almost overnight. The experts began to predict that e-tailing was
destined to be little more than a tag-on to in-store retailing.
However, today's online retailing is alive, well, and growing. With easier-to-use Websites,
improved online service, and the increasing sophistication of search technologies, online
business is booming. In fact, online buying is growing at a much brisker pace than retail
buying as a whole. Last year's U.S. online retail sales reached $113.6 billion, a 28 percent
leap over the previous year, representing 4.7 percent of all retail sales

All types of retailers now use the Web as an important marketing tool. The online sales of
giant brick-and-mortar retailers, such as Sears, Wal-Mart, Staples, and Gap, are increasing
rapidly. Several large click-only retailers-Amazon.com, online auction site eBay, online
travel companies such as Travelocity and Expedia, and others-are now making it big on the
Web. At the other extreme, hordes of niche marketers are using the Web to reach new

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markets and expand their sales. Today's more sophisticated search engines (Google, Yahoo!)
and comparison shopping sites (Shopping.com, Buy.com, Shopzilla, and others) put almost
any e-tailer within a mouse click or two's reach of millions of customers. E24 Online
retailing:
Today's online retailing is alive, well, and growing, especially for click-and-brick retailers
like Staples. Its Web site, staples.com, now accounts for almost one-quarter of sales. "That
was easy!"
Still, much of the anticipated growth in online sales will go to multichannel retailers the
click-and-brick marketers who can successfully merge the virtual and physical worlds.
Consider office-supply retailer Staples. Based on two years of research, Staples recently
redesigned its Web site to extend its "Staples-That was easy" marketing promise to online
shoppers. The retailer's online sales are now growing at an even faster clip than its store sales.
Sales through Staples.com jumped 27 percent last year, now accounting for almost one-
quarter of Staples's revenues. But Staples online operations aren't robbing from store sales.
Instead, the in-store and online channels compliment one another.
For example, customers can buy conveniently online and then return unwanted or defective
merchandise to their local Staples store. And in-store Staples.com kiosks ensure that
customers never leave the store without finding what they need. As a result, for example, the
average yearly spending of small-business customers jumps more than fourfold when they
combine shopping online with shopping in the store

The Rise of Mega retailers

The rise of huge mass merchandisers and specialty superstores, the formation of vertical
marketing systems, and a rash of retail mergers and acquisitions have created a core of
superpower mega-retailers. Through their superior information systems and buying power,
these giant retailers can offer better merchandise selections, good service, and strong price
savings to consumers. As a result, they grow even larger by squeezing out their smaller,
weaker competitors.
The megaretailers are also shifting the balance of power between retailers and producers. A
relative handful of retailers now control access to enormous numbers of consumers, giving
them the upper hand in their dealings with manufacturers. For example, in the United States,
Wal-Mart's revenues are more than five times those of Procter & Gamble, and Wal-Mart
generates almost 20 percent of P&G's revenues. Wal-Mart can, and often does, use this power
to wring concessions from P&G and other suppliers

MAJOR TYPES OF RETAIL ORGANISATIONS

Corporate chain stores: Two or more outlets that are commonly owned and controlled,
employ central buying and merchandising, and sell similar lines of merchandise. Corporate
chains appear in all types of retailing, but they are strongest in department stores, food stores,
drug stores, shoe stores, and women's clothing stores.

Voluntary chains: Wholesaler-sponsored groups of independent retailers engaged in bulk

buying and common merchandising.

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Retailer cooperatives: Groups of independent retailers who set up a central buying
organization and conduct joint promotion efforts.

Franchise organizations: Contractual association between a franchiser (a manufacturer,

wholesaler, or service organization) and franchisees (independent businesspeople who buy
the right to own and operate one or more units in the franchise system). Franchise
organizations are normally based on some unique product, service, or method of doing
business, or on a trade name or patent, or on goodwill that the franchiser had developed.

Merchandising conglomerates: Free-form corporations that combine several diversified

conglomerates retailing lines and forms under central ownership, along with some integration
of their distribution and management functions.

Franchise: A contractual association between a manufacturer, wholesaler, or service

organization (a franchiser) and independent businesspeople (franchisees) who buy the right to
own and operate one or more units in the franchise system.

DIRECT MARKETING
Direct marketing enables marketers to reach their target audience without relying on
intermediaries like retailers, wholesalers, or newspapers.
There are many types of direct marketing: Direct mail, telemarketing, electronic marketing,
online marketing, etc. The following are the Characteristics:
a) Direct marketing is non-public as the message is normally addressed to a specific
person.
b) Direct marketing is immediate as messages can be prepared very quickly.
c) Direct marketing can be customized, so messages can be tailored to appeal to specific
customers.
d) Direct marketing is interactive: it allows a dialogue between the communicator and
the consumer, and messages can be altered depending on the consumer’s response.

Direct marketing is the direct connections and communications with carefully targeted
individual consumers to both obtain an immediate response and cultivate lasting customer
relationships-the use of direct mail, the telephone, direct-response television, e-mail, the
Internet, and other tools to communicate directly with specific consumers.
Each category involves specific promotional tools used to communicate with consumers.
For example, advertising includes broadcast, print, Internet, outdoor, and other forms. Sales
promotion includes discounts, coupons, displays, and demonstrations. Personal selling
includes sales presentations, trade shows, and incentive programs. Public relations includes

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press releases, sponsorships, special events, and Web pages. And direct marketing includes
catalogs, telephone marketing, kiosks, the Internet, and more.
At the same time, marketing communication goes beyond these specific promotion tools.
The product's design, its price, the shape and color of its package, and the stores that sell it all
communicate something to buyers. Thus, although the promotion mix is the company's
primary communication activity, the entire marketing mix-promotion, and product, price, and
place-must be coordinated for the greatest communication impact.

Direct marketing consists of direct connections with carefully targeted individual consumers
to both obtain an immediate response and cultivate lasting customer relationships.
Direct marketers communicate directly with customers, often on a one-to-one, interactive
basis. Using detailed databases, they tailor their marketing offers and communications to the
needs of narrowly defined segments or even individual buyers.
Beyond brand and relationship building, direct marketers usually seek a direct, immediate,
and measurable consumer response.

New Direct-Marketing Model

Early direct marketers such as catalog companies, direct mailers, and telemarketers gathered
customer names and sold goods mainly by mail and telephone. Today, however, fired by
rapid advances in database technologies and new marketing media-especially Internet
marketing has undergone a dramatic transformation. According to the head of the Direct
Marketing Association, "In recent years, the dramatic growth of the Internet and the
increasing sophistication of database technologies have [created] an extraordinary expansion
of direct marketing and a seismic shift in what it is, how it's used, and who uses it. Direct
marketing has become the fastest-growing form of marketing

Direct marketing continues to become more Web-oriented, and Internet marketing is claiming
a fast-growing share of direct marketing spending and sales. The Internet now accounts for
only about 16% of direct marketing-driven sales. However, the DMA predicts that over the
next five years Internet marketing expenditures will grow at a blistering 18% a year, three
times faster than expenditures in other direct marketing media. Internet-driven sales will
grow by 12.6%.
Whether employed as a complete business model or as a supplement to a broader integrated
marketing mix, direct marketing brings many benefits to both buyers and sellers.
Benefits to Buyers
For buyers, direct marketing is convenient, easy, and private. Direct marketers never close
their doors, and customers don't have to battle traffic, find parking spaces, and trek through
stores to find products. From the comfort of their homes or offices, they can browse catalogs
or company Web sites at any time of the day or night. Business buyers can learn about
products and services without tying up time with salespeople.
Direct marketing gives buyers ready access to a wealth of products, For example,
unrestrained by physical boundaries, direct marketers can offer an almost unlimited selection
to consumers almost anywhere in the world. For example, by making computers to order and
selling directly, Dell can offer buyers thousands of self-designed PC configurations, many

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times the number offered by competitors who sell preconfigured PCs through retail stores.
And just compare the huge selections offered by many Web merchants to the more meager
assortments of their brick-and-mortar counterparts. For instance, log onto Bulbs.com, "the
Web's no. 1 light bulb superstore," and you'll have instant access to every imaginable kind of
light bulb or lamp-incandescent bulbs, fluorescent bulbs, projection bulbs, surgical bulbs,
automotive bulbs-you name it. No physical store could offer handy access to such a vast
selection.
Direct marketing channels also give buyers access to a wealth of comparative information
about companies, products, and competitors. Good catalogs or Web sites often provide more
information in more useful forms than even the most helpful retail salesperson can. For
example, the Arnazon.com site offers more information than most of us can digest, ranging
from top-10 product lists, extensive product descriptions, and expert and user product reviews
to recommendations based on customers' previous purchases. Sears catalogs offer a treasure
trove of information about the store's merchandise and services. You probably wouldn't think
it strange to see a Sears salesperson referring to a catalog in the store while trying to advise a
customer on a specific product or offer.
Finally, direct marketing is interactive, and immediate buyers can interact with sellers by
phone or on the seller's Web site to create exactly the configuration of information, products,
or services they desire, and then order them on the spot. Moreover, direct marketing gives
consumers a greater measure of control. Consumers decide which catalogs they will browse
and which Web sites they will visit.

Benefits to Sellers
For sellers, direct marketing is a powerful tool for customer relationship building. Using
database marketing, today's marketers can target small groups or individual consumers and
promote their offers through personalized communications. Because of the one-to-one nature
of direct marketing, companies can interact with customers by phone or online, learn more
about their needs, and tailor products and services to specific customer tastes. In turn,
customers can ask questions and volunteer feedback.
Direct marketing also offers sellers a low-cost, efficient, speedy alternative for reaching their
markets. Direct marketing has grown rapidly in B2B marketing, partly in response to the
ever-increasing costs of marketing through the sales force. When personal sales calls cost an
average of more than $400 per contact, they should be made only when necessary and to
high-potential customers and prospects. Lower-cost-per-contact media-such as telemarketing,
direct mail, and company Web sites-often prove more cost effective. Similarly, online direct
marketing results in lower costs, improved efficiencies, and speedier handling of channel and
logistics functions, such as order processing, inventory handling, and delivery.
Direct marketers such as Arnazon.com or Dell also avoid the expense of maintaining a store
and the related costs of rent, insurance, and utilities, passing the savings along to customers.
Direct marketing can also offer greater flexibility. It allows marketers to make on-going
adjustments to its prices and programs, or to make immediate and timely announcements and
offers. For example, Southwest Airlines' DING application takes advantage of the flexibility
and immediacy of the Web to share low-fare offers directly with customers

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Finally, direct marketing gives sellers access to buyers that they could not reach through
other channels. Smaller firms can mail catalogs to customers outside their local markets and
post 1-800 telephone numbers to handle orders and inquiries. Internet marketing is a truly
global medium that allows buyers and sellers to click from one country to another in seconds.
A Web surfer from Lagos can access an online catalogue as easily as someone living in
London, the direct retailer's hometown. Even small marketers find that they have ready
access to global markets.

Customer database
This is an organised collection of comprehensive data about individual customers or
prospects, including geographic, demographic, psychographic, and behavioral data.
Effective direct marketing begins with a good customer database. A customer database is an
organized collection of comprehensive data about individual customer or prospects, including
geographic, demographic, psychographic, and behavioral data. A good customer database can
be a potent relationship-building tool. The database gives companies "a snapshot of how
customers look and behave." Says one expert, "A company is no better than what it knows
[about its customers]. "s
Many companies confuse a customer database with a customer mailing list. A customer
mailing list is simply a set of names, addresses, and telephone numbers. A customer database
contains much more information. In consumer marketing, the customer database might
contain a customer's demographics (age, income, family members, birthdays),
psychographics (activities, interests, and opinions), and buying behaviour (buying
preferences and the recency, frequency and monetary value- RFM- of past purchase).
In business-to-business marketing, the customer profile might contain the products and
services the customer has bought; past volumes and prices; key contacts (and their ages,
birthdays, hobbies, and favorite foods); competing suppliers; status of current contracts;
estimated customer spending for the next few years; and assessments of competitive strengths
and weaknesses in selling and servicing the account.

Companies use their databases in many ways. They use databases to locate good potential
customers and to generate sales leads. They can mine their databases to learn about customers
in detail, and then fine-tune their market offerings and communications to the special
preferences and behaviors of target segments or individuals. In all, a company's database can
be an important tool for building stronger long-term customer relationships.

Forms of Direct Marketing

The major forms of direct marketing include personal selling, direct-mail marketing, catalog
marketing, telephone marketing, direct-response television marketing, kiosk marketing, and
direct marketing technologies, and online marketing
(a) Telephone marketing or telemarketing: Telephone marketing or telemarketing uses
the telephone to sell directly to consumers. It has become a major direct marketing tool.
Marketers use outbound telephone marketing to generate and qualify sales leads, and
sell directly to consumers and businesses. Calls may also be for research, testing,

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 database building or appointment making, as a follow-up to a previous contact, or as
part of a motivation or customer-care programme.
(b) Direct-mail marketing: Direct-mail marketing involves sending an offer,
announcement, reminder or other item to a person at a particular address. Using highly
selected mailing lists, direct marketers send out millions of mail pieces each year –
letters, ads, brochures, samples, video- and audio-tapes, CDs, and other ‘salespeople
with wings’. Direct mail expenditure per capita varies across the major EU countries,
but in general, direct-mail spend per head is disproportionately higher than that spent
on telemarketing and, in a majority of cases, represents well over half of the total direct
marketing expenditure per capita.
(c) Catalogue marketing: Catalogue shopping once started almost as explosively as the
Internet, though few people might remember this. Cataloguers’ sales pitch was
remarkably similar too – no need to struggle to the store, vast choice, lower prices.
Today, the growth in catalogue shopping has slowed but catalogues are increasingly
used by store retailers, which see them as an additional medium for cultivating sales.
Most consumers enjoy receiving catalogues and will sometimes even pay to get them.
Many catalogue marketers are now even selling their catalogues at bookstores and
magazine stands. Many business-to-business marketers also rely heavily on catalogues.
(d) Direct-response television marketing: Direct-response television marketing (DRTV)
takes one of two main forms.
 Direct-response advertising: Direct marketers air television spots, 60 or 120
seconds long that persuasively describe a product or service and give customers a
free-phone number for ordering. Direct-response television advertising can also be
used to build brand awareness, convey brand/product information, generate sales
leads and build a customer database.
 Home-shopping channels: They are TV programmes or entire channels dedicated
to selling goods and services. The programmes offer bargain prices on products
ranging from jewellery, lamps, collectible dolls and clothing, to power tools and
consumer electronics – usually obtained by the home-shopping channel at close-out
prices. The presentation of products is upbeat and a theatrical atmosphere is created,
often with the help of celebrity guests, and up-to-date information can be given on
product availability, creating further buying excitement.

Public policy and ethical issues in direct marketing

Direct marketers have to address a variety of public policy and ethical issues such as: (i)
irritation, (ii) unfairness, (iii) deception and (iv) fraud and (v) invasion of privacy. Direct
marketers and their customers have typically forged mutually rewarding relationships.
However, there remains a potential for customer abuse, ranging from irritation and unfair
practices to deception and fraud. There also have been growing concerns about invasion of
privacy, perhaps the most difficult public policy issue currently facing the direct marketing
industry.

Retailing is an aspect of distribution system because the retailer is the last part of the
distribution channel after the wholesaler. It is a commercial transaction in which a buyer

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intends to consume the good and service through personal, family, or household use.
Retailing is the sales of goods and services to the end users, not for resale, but for use and
consumption by the purchaser. Distribution activity encompasses any mechanism for making
available goods and services to consumers. Retailing activity provides the link between the
consumers and the producers or wholesalers. Retailers that make the goods to reach the final
consumers includes the following:

i. activities of the department store,

ii. the supermarket
iii. auction companies on the Internet
iv. The travel agent,
v. the telephone company
vi. the local branch of a bank

Retailing involves the sale of merchandise from a single point of purchase directly to a
customer who intends to use that product. The single point of purchase could be a brick-and-
mortar retail store, an Internet shopping website, a catalogue, or even a mobile phone. The
retail transaction is at the end of the chain. Manufacturers sell large quantities of products to
retailers, and retailers attempt to sell those same quantities of products to consumers.

Importance of Retailing

- Retailers are the final link in the supply chain between the manufacturers and consumers.
- Retailing is important because it allows manufacturers to focus on producing goods
without having to be distracted by the enormous amount of effort that it takes to interact
with the end-user customers who want to purchase those goods.
- Retailers make the purchase of goods easy for the consumer. This is why retail stores
have salespeople, why Internet shopping websites have customer service instant chat
peoples, and why catalogues have descriptions, photos, and toll-free phone numbers.
- Retailing displays products, describes the features and benefits of products, stocks
products, processes payments and does whatever it takes to get the right products at the
right price to the right customers at the right time.
- Some retailers offer additional services to the retail transaction like personal shopping
consultations, and gift wrapping to add something extra to the retail customer experience
and exceed the retail customer experience.

Difference between Retail and Wholesale

 Wholesalers sell in large bulk quantities, without worrying about many of the aspects
of retailing that consumers expect like visual merchandising.
 Wholesalers do not want to deal with a large number of end-user customers. Rather,
their goal is to sell large quantities to a small number of retailing companies.
 It is rare for a wholesaler to sell goods directly to consumers. The exception to that
would be membership warehouse clubs. These members-only retail stores are a hybrid
of wholesaling and retailing in that they sell directly to consumers, but they sell in

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 large quantities, which often allows them to sell at prices that are lower than other
retailers that sell in small quantities from impeccably merchandised stores in high-rent
shopping districts.
 Price: The big difference between wholesale and retail is in the price. The retail price
is always more than the wholesale price. The reason for this is because the added cost
of selling merchandise to end-user customers (these costs include; labour cost, rent,
and advertising cost) is factored into the pricing of the merchandise. The wholesaler
does not have to deal with such expenses, which allows him to sell goods at a lower
cost.

How Retail Supply Chain Work

The retail supply chain consists of manufacturers, wholesalers, retailers and the consumer
(end user). The wholesaler is directly connected to the manufacturer, while the retailer is
connected to the wholesaler, and not to the manufacturer.

The roles of the key players in a typical retail supply chain:

Manufacturers – Produce the goods, using machines, raw materials, and labour

Wholesalers – Purchase finished goods from the manufacturers and sell those goods to
retailers in large bulk quantities

Retailers – Sell the goods in small quantities to the end-user at a higher price, theoretically at
the MSRP (Manufacturers Suggested Retail Price).

Consumer – End user who buys the goods (or “shops”) from the retailer for personal use.

However, there are exceptions to this traditional supply chain. Some of the world's largest
retail companies (Walmart, and Amazon.com in the US and in Nigeria we have A. G.
Leventis Nigeria Plc, Addidde and Shoprite, for example) are large enough to deal directly
with manufacturers, without the need for a wholesaler in the middle of the transaction.

Different Types of Retail Stores

The following are the different types of brick-and-mortar retail stores where consumers can
purchase products for immediate use or consumption:

Department Stores: They sell a wide range of merchandise that is arranged by category into
different sections of the physical retail space. Some department store categories include
shoes, clothing, beauty products, jewellery, and housewares. Examples of department store
retailers include Shoprite, A.G. Leventi, Citrus Lifestyle Stores at Adeniran Ogunsanya
Shpping Mall, NexTime Supermarket & Departmental Store in Port Harcourt, Spar Nigeria in
Ilupeju, Adbushi.com, Idiroko, Goodies, VI, Floxy, Ajah, Fatodam Investment, Ikeja,
Thousand Stores, Lekki.

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Grocery Stores and Supermarkets: Sell all types of food and beverage products, and
sometimes also home products, clothing, and consumer electronics as well. Examples of
grocery stores are: Domino Stores Ltd at Sabo Yaba, Addide, Supermart Nigeria etc.
Example of supermarket chains in Nigeria are: Value4naira.com, online supermarket,
Supermarkets.ng Online Supermarket, Addide Supermarket

Warehousing Retailers: These are large no-frills warehouse-type facilities stocked with a
large variety of products packaged in large quantities and sold at lower-than-retail prices e.g.
GIG Logistics Warehousing and Distribution Services, Shoptomydoor.com, MDS Logistics
etc.

Specialty Retailers: Specialize in a specific category of products such as toys, sports wears,
shoes (Cowbellmilk Specialty food shop, Deprince Supermarket Magodo, Kitchen Planet,
GrapeTree International Ltd Shopping and retail, Bata and Leonard in Nigeria).

Convenience Retailer: This is usually part of a retail location which sells gasoline primarily,
but also sell a limited range of grocery merchandise and auto care products at a premium
"convenience" price from a brick-and-mortar store eg TheNairaStore, Quickshop Online
Store

Discount Retailer: This sell a wide variety of products which are often private labelled or
generic brands at below-retail prices eg Bargain Hunt in US. Internet E-TailerDiscount
retailers like Family Dollar, Dollar General , and Big Lots will often source closeout and
discontinued merchandise at lower-than-wholesale prices and pass the savings onto their
customers.

Mobile Retailer - Uses a smartphone platform to process retail transactions and then ships
the products that were purchased directly to the customer.

Internet E-tailer: Sell from an Internet shopping website and ship the purchases directly to
customers at their homes or workplaces and without all the expenses of a traditional brick-
and-mortar retailer, usually sell merchandise for a lower-than-retail price. Examples include;
Jumia, Konga, Amazon.com

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