CHAPTER 4: RETAIL

CHANNEL MEMBERS
PREPARED BY:
NORAISHAH BINTI KAMAROLZAMAN

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 LEARNING OUTCOME
• TO IDENTIFY PERTINENT CHANNEL MEMBERS IN THE DISTRIBUTION
CHANNEL.
• TO UNDERSTAND THE ROLES OF RETAILERS IN THE DISTRIBUTION CHANNEL.
• TO IDENTIFY THE RETAIL CHARACTERISTICS.
• TO COMPREHEND THE TYPOLOGY OF RETAILERS.
• TO UNDERSTAND RETAIL TRENDS.

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Objective
DISTRIBUTION TASKS PERFORMED
BY RETAILERS

The role of the retailer in the distribution channel,

regardless of his size or type, is to interpret the
demands of his customers and to find and stock
the goods these customers want, when they
want them, and in the way they want them. This
adds up to having the right assortments at the
time customers are ready to buy.

— Charles Y. Lazarus

©2013Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 DISTRIBUTION TASKS
PERFORMED BY RETAILERS
• OFFER MANPOWER & PHYSICAL FACILITIES CLOSE TO
CONSUMERS’ RESIDENCES
• PROVIDE PERSONAL ASSISTANCE TO HELP SELL PRODUCTS
• INTERPRET AND RELAY CONSUMER DEMAND
• DIVIDE LARGE QUANTITIES INTO CONSUMER-SIZED LOTS
• OFFER STORAGE
• REMOVE RISK BY ORDERING IN ADVANCE OF THE SEASON
 RETAILERS’ POSITION
• CONSISTS OF BUSINESS FIRMS ENGAGED PRIMARILY IN
SELLING MERCHANDISE FOR PERSONAL OR HOUSEHOLD
CONSUMPTION AND PROVIDING RELATED SERVICES AS
REQUIRED BY THE END USERS.
• THE MOST INFORMED AND KNOWLEDGEABLE ABOUT THEIR
CUSTOMERS AND CONSUMER NEEDS.
• MANY DEVELOPING AND DEVELOPED ECONOMIES, THEY ARE
N O W G E T T I N G M U C H L A R G E R A N D B Y PA S S I N G
WHOLESALERS IN GETTING THEIR SUPPLIES.
• THEIR POSITION INDEED CHANGING JUST AS THE LIFESTYLES
OF CONSUMERS ARE CHANGING.
Channels Management 5
ROLES OF RETAILERS IN THE CHANNEL STRUCTURE
• RETAILING IS DEFINED AS:
THOSE BUSINESS ACTIVITIES INVOLVED IN THE SALE
OF GOODS AND SERVICES TO END USERS FOR
ULTIMATE CONSUMPTION.
• RETAIL ACTIVITIES ARE SPECIFIC TO RETAILERS.
• HOWEVER THE RETAILING FUNCTION IS NOT
NECESSARILY THE EXCLUSIVE DOMAIN OF RETAILERS
AS OTHER CHANNEL MEMBERS MAY ALSO CARRY
OUT SUCH FUNCTION.
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 THE CHARACTERISTICS OF RETAILING
• RETAIL LOCATION:
1. RETAILER MIX.
2. CUSTOMER CHARACTERISTICS.
3. TRAFFIC COUNTS.
4. VISIBILITY.
5. RENTAL TERM.
• MERCHANDISE MIX:
1. WIDTH.
2. DEPTH.
• SHORT RUN FOCUS.
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 CONTINUE
• RETAIL LOCATION:
1.IT IS A LONG TERM STRATEGIC ELEMENT.
2.CONSUMERS ARE MORE LIKELY TO VISIT RETAIL OUTLETS THAT MEET
THEIR LOCATION PREFERENCES.
3.GROCERY OUTLETS LOCATED NEAR RESIDENTIAL AREA WHILE LARGE
SCALE RETAILERS LOCATED AROUND AREAS IN URBAN AND SUB
URBAN LOCATIONS.
4.FACTORS FOR RETAIL LOCATION:
RETAILER MIX:
REFERS TO OTHER BUSINESS LOCATED WITHIN THE PROPOSED LOCATION.
PROBABLY LOCATE WHERE THERE ARE COMPLEMENTARY BUSINESSES RATHER
THAN DIRECT COMPETITORS.

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 CONTINUE
CUSTOMER CHARACTERISTICS:
REFER TO PROFILE OF THE SHOPPERS IN THE AREA.
DEMOGRAPHIC AND LIFESTYLE CHARACTERISTICS MUST MATCH WITH
THE TARGET MARKET ON WHICH THEY ARE FOCUSING.
TRAFFIC COUNTS:
INVOLVE PEDESTRIAN AND VEHICULAR TRAFFIC FLOWS.
PEDESTRIAN TRAFFIC REFERS TO THE NUMBER OF PEOPLE PASSING BY A
SPECIFIC LOCATION.
VEHICULAR TRAFFIC REFER TO THE NUMBER OF VEHICLES PASSING BY
THE SPECIFIC LOCATION INCLUDE PUBLIC TRANSPORTATION.
VISIBILITY:
A LOCATION WHERE SHOPPERS CAN SEE THEIR STORES CLEARLY.
ANCHOR TENANTS ARE WELL KNOWN AND ESTABLISHED RETAILERS THAT
ARE LOCATED AT EACH ENDS OF THE SHOPPING COMPLEX.

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 CONTINUE
RENTAL TERM:
ASPECTS SUCH AS DURATION OF THE LEASE, RENEWAL OPTIONS
AND RENTAL AMOUNTS.
IT WILL MOTIVATE RETAILERS TO PUSH FOR LONG TERM LEASE OR
SHORT TERM LEASE.

❖FOR NON PHYSICAL STORE SUCH AS DIRECT MARKETING AND

DIRECT SELLING NO NEED FOR LOCATION AS AN IMPORTANT
CRITERIA.

Channels Management 10
 CONTINUE
• MERCHANDISE MIX:
1.REFERS TO OPTION OF OFFERING WIDE VARIETY AND
ASSORTMENTS OF MERCHANDISE.
2.DEPEND ON THE KIND OF STORES.

• SHORT RUN FOCUS:

1.FOCUS ON PROMOTION AND PRICING.
2.RETAIL ADVERTISING MOST OFTEN SALES ORIENTED FOR
IMMEDIATE RESPONSE OF THE CUSTOMERS AND IMMEDIATE
SALES FOR RETAILERS.
3.OFFER SPECIAL SALES OR PRICE REDUCTIONS.
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 A TYPOLOGY OF RETAILERS
• WE TYPIFY RETAILERS BASED ON:
1.OWNERSHIP:
SOLE PROPRIETOR/INDEPENDENT RETAILER.
CHAIN.
FRANCHISE.
MANUFACTURER-OWNED RETAIL OUTLETS.
2.MERCHANDISE STRATEGY:
WIDTH, DEPTH AND CONSISTENCY.
PRICE SERVICE EMPHASIS.
3.SIZE OF ESTABLISHMENT
4.TYPE OF LOCATION.
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 CONTINUE
• RETAIL OWNERSHIP:
1.SOLE PROPRIETOR/INDEPENDENT RETAILER:
OWNS AND OPERATES ONLY ONE RETAIL OUTLET.
FLEXIBLE IN PLANNING BUT HAVE COMPETITIVE PRESSURES FROM
LARGE RETAIL OUTLETS.
BARGAINING POWER IS LIMITED.
2.CHAIN RETAILERS:
OWNED AND OPERATED BY ONE ORGANIZATION.
BIG CONGLOMERATES, ABLE TO USE BARGAINING POWER AND
ACHIEVE HIGH ECONOMIES OF SCALE.
ADVANTAGE OF MASS DISTRIBUTION BUT LIMITATION IN MEETING
LOCAL AND REGIONAL NEEDS.
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 CONTINUE
3. FRANCHISE:
TWO TYPES:
PRODUCT OR TRADEMARK FRANCHISING.
BUSINESS FORMAT FRANCHISING.
PRODUCT OR TRADEMARK FRANCHISING:
FRANCHISEE OPERATES UNDER FRANCHISOR OR SUPPLIER NAME BUT
FREE TO CHOOSE THEIR STORES, STORE OPERATION AND RETAIL
STRATEGIES. E.G.: KWIK LAUNDRY
. BUSINESS FORMAT FRANCHISING:
FRANCHISOR IS VERY MUCH CONTROL IN RETAIL OPERATION AND
FRANCHISEE NEEDS TO FOLLOW THE DIRECTION OF FRANCHISOR
INCLUDING PROCEDURES AND POLICIES. E.G.: PETRONAS SERVICE
OUTLET OR SHELL OR ESSO SERVICE STATION.
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 CONTINUE

ADVANTAGES ARE ABILITY TO USE A PROVEN RETAIL FORMAT

WITHOUT HASSLE, PROVISION TRAINING AND OTHER
ASSISTANCE, ABILITY TO USE AND RELATE THE GOOD IMAGE
AND ACCESS TO A PROTECTED TERRITORY.

DIADVANTAGES ARE LIMITED CONTROL, HIGHER PRICE PAID

FOR GOODS AND SERVICES, RELINQUISHING OF POWER
AND PAYMENT TO THE FRANCHISOR ON THE BASIS OF ALSE
MADE AND NOT PROFIT.

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 CONTINUE

4. MANUFACTURER-OWNED RETAIL OUTLETS:

MANUFACTURERS OPEN ITS OWN OUTLETS.
THEY WANT BETTER CONTROL OF THEIR DISTRIBUTION.
MUST HAVE ADEQUATE RESOURCES AND NECESSARY
EXPERTISE AND EQUIP WITH MARKETING KNOWLEDGE.

Channels Management 16
 CONTINUE
• MERCHANDISE STRATEGY:
1.MERCHANDISE WIDTH:
THE DIFFERENT PRODUCT LINES WHICH RETAILER CARRIES.
2.MERCHANDISE DEPTH:
THE NUMBER OF SELECTIONS AVAILABLE WITHIN A PRODUCT LINE.
3.MERCHANDISE CONSISTENCY:
THE DIFFERENCES IN THE PRODUCT LINES OFFERED BY RETAILERS.
“SCRAMBLED MERCHANDISING STRATEGY”
4.PRICE SERVICE EMPHASIS:
LOW PRICES TO WIN THE PRICE CONSCIOUS CONSUMERS

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 CONTINUE
*BASED ON MERCHANDISE STRATEGY THERE ARE SEVERAL TYPES OF
RETAILERS WHICH CAN BE DIVIDED INTO TWO THAT IS:
1. STORE RETAILERS.
2. NON-STORE RETAILERS.

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Objective
RETAIL STRUCTURE
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Alternative Bases for Classifying Retailers

• BY OWNERSHIP OF ESTABLISHMENT• BY METHOD OF CONSUMER

CONTACT
• BY KIND OF BUSINESS
(MERCHANDISE HANDLED) • BY TYPE OF LOCATION
• BY SIZE OF ESTABLISHMENT • BY TYPE OF SERVICE
RENDERED
• BY DEGREE OF VERTICAL
INTEGRATION • BY LEGAL FORM OF
ORGANIZATION
• BY TYPE OF RELATIONSHIP WITH
OTHER BUSINESS ORGANIZATIONS • BY MANAGEMENT
ORGANIZATIONS OR
OPERATIONAL TECHNIQUE

©2013Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 KIND-OF-BUSINESS CLASSIFICATIONS

Retail Trade
• Motor vehicle & parts • Gasoline stations
dealers • Clothing & clothing
• Furniture & home accessories stores
furnishings stores • Sporting goods, hobby,
• Electronics & appliance book, & music stores
stores • General merchandise
• Building material & garden stores
equip. & supply dealers • Miscellaneous store
• Food & beverage stores retailers
• Health & personal care • Non store retailers
stores
 Store retailers Non-store retailers
Supermarkets:selling a wide range of dry Vending Machines:through coin or
grocery items, range from few shop houses card-operated machines, goods
to awarehouse-sized facility,some include food and drinks, cigarettes,
operated by locals or multinational chains. telephone reload ccards, mineral
water and services such as insurance
and hotel reservations.

Hypermarkets:combine supermarket and a E-retail: Internet transcations.

department store, offer from general
merchandise to fresh produce and FMCG.

Convenience store:offer limited range of Direct selling:the use of salespersons

FMCG, near residential areas or high to sell goods or services door to door
pedestrian traffic, operate 24 hours basis or through telemarketing

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Types of retailers
 Store retailers

Warehouse stores:large units that offer lower prices in a no-frills setting,reduce

costs of operation as they operate in low cost locations, obtain supplies directly
from manufacturers .

Specialty stores:sell one or limited lines of related merchandise, offer wide

selections but limited number of products, quite knowledgeable of the products
they handle.

Category killers:specialty stores that dominates other retailers in a particular

merchandise category.

Department stores:large variety merchandise sold,extensive assortment of

consumer goods are deprtmentalized by gender, age or lifestyle, through slef-
service or with slaes assistance and generally under one common store
management.

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Types of retailers
 Store retailers

Night markets:`open air` street shopping area with variety of local vendors set
up stalls, popular in urban and rural area, wide variety of merchandise from
fresh produce to fashion and accessories and affordable price.

Wet markets:wet and rather disorganized in terms of stall layout, attractive in

small towns, started early morning as early as 5am or 6am and stop at noon,
selling fresh produce such as fish, meat, poutlry, vegetables and fruits

Sundry shops:traditional’mom and pop’ stores, very much like convenience stores
and still found in towns and villages

Types of retailers
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 Store retailers Non-store retailers
Supermarkets e.g.: Econsave Vending Machines
Hypermarkets e.g.: Tesco, Giant, Mydin E-retail

Convenience store e.g.: 7-eleven Direct selling

Warehouse store e.g.: furniture
Specialty store e.g.: Bata, Body Shop

Category killers e.g.: Toys ‘R’ Us, Mr. DIY

Department store e.g.: Aeon, Parkson, The

Store
Night markets
Wet markets
Sundry shops (independent stores in a
limited range of goods)
Channels Management 24
Types of retail stores in Malaysia
 CONTINUE

• SIZE OF RETAIL ESTABLISHMENTS:

1.DIFFERENT RETAIL FORMATS HAVE DIFFERENT STORE SIZES.
2.HYPERMARKET: 5,000 SQUARE METRES, SMALL PROVISION
SHOPS: < 400 SQ. M., CONVENIENCE STORES: 400 SQ. M. TO
1,000 SQ. M. AND NON FOOD RETAILERS: < 5,000 SQ. M.
3.IT IS A REFLECTION OF THE RETAILER’S BARGAINING POWER IN
CONTROLLING THEIR SUPPLY.

Channels Management 25
 CONTINUE
• TYPES OF LOCATION:
1. SHOPPING COMPLEX OR SHOPPING MALL:
ANCHOR TENANTS:WELL-ESTABLISHED RETAILERS THAT ARE ABLE TO
ATTRACT MANY VISITORS,LOCATED AT BOTH ENDS OF A SHOPPING
COMPLEX AND REGULAR TENANTS.
2. FREESTANDING LOCATIONS:
HYPERMARKET, LARGE RETAILERS INCLUDING WAREHOUSE RETAILERS.
STAND ALONE BUILDING.
3. SHOP HOUSES:
SMALL RETAILERS OR SERVICE PROVIDERS AND SPECIALTY STORES.

Channels Management 26
Objective
RETAILERS’ GROWING POWER IN
9 MARKETING CHANNELS

Increased size & buying Become power retailers

power &
category killers
Application of advanced Information technology &
Technologies the Internet; threetailing

Use of modern marketing Modern techniques;

strategies relationship marketing

©2013Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Objective
RETAIL STRUCTURE TRENDS
7

Decreasing number of establishments

Increasing sales

= increase in size of retail establishments

measured by average sales volume
per store

©2013Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CONCENTRATION IN RETAILING

In 2002
4% of all retail firms
accounted for nearly 80%
of total sales!!
 RETAIL TRENDS IN MALAYSIA
• CHANGING LIFESTYLES AND BUYING PREFERENCES OF MALAYSIANS
WITH INCREASE IN THE EDUCATION LEVEL OF THE POPULATION.
• MORE SOPHISTICATED AND WESTERNIZED IN BUYING BEHAVIOUR.
• REQUIRED MORE MODERN RETAIL FORMATS.
• FOREIGN RETAILERS PROVIDE NEW RETAIL FORMATS AND
ATTRACTIONS ARE WINNING THE LARGE PROPORTION OF
MALAYSIAN CONSUMERS. (2 TO 3 TIMES A MONTH IN BUYING).
• THE EXISTENCE OF NEW AND MODERN SHOPPING MALL IN URBAN
AREAS TO MEET THE NEEDS OF MORE TRENDY AND MODERN
LOOKING BESIDES TOURIST ATTRACTIONS.

Channels Management 30
 CONTINUE

• IN 2011, THERE ARE 300 RETAIL CENTRES IN MALAYSIA.

• THE EMERGENCE OF SUBURBAN MALLS SUCH AS THE CURVE,
SUBANG PARADE, EMPIRE SHOPPING GALLERY AND SUNWAY
PYRAMID HAVE ATTRACT MANY CUSTOMERS TO SHOPPING AT
THEIR PLACE.
• SUBURBAN MALLS ARE AN INVESTMENT OPTION TO
CAPITALISE ON MALAYSIA’S RETAIL SECTOR.
• SOME FACTORS THAT CAN BE CONSIDERED SUCH AS
OCCUPANCY RATES, OPTIMUM INCOME AT MARKET RATES,
AGEING, CONSUMER TRAFFIC AND LEAN OPERATIONAL
COSTS.
Channels Management 31
 CONTINUE

• THE ACCEPTANCE OF OMNI-CHANNEL TRADE AND DIGITAL SAVVY

MERCHANDISING IS IMPORTANT.
• THE NEED TO REVIEW OLD SYSTEMS AND PROCEDURES. STORE
OPERATIONS AND MINDSETS MUST CHANGE.
• RETAILERS CREATE NEW OPERATING MODELS THAT ARE LESS FOCUSED
ON THEIR STORE VS. THE WEB AND MORE FOCUSED ON CREATING
EXPERIENCES THAT GIVES CUSTOMERS MORE CONTROL AND
CONVENIENT WAYS TO SHOP. 

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 PAST SEMESTER QUESTIONS
• THE EMERGENCE OF ONLINE RETAILERS SUCH AS
AMAZON.COM, MUDAH.COM, LAZADA, ZALORA
AND OTHER HELP CUSTOMERS SEE, CHOOSE AND
BUY THE PRODUCRS FROM VARIOUS COMPANIES
WITHOUT HAVING TO GO TO THE SHOP. JUSTIFY
THREE (3) REASONS WHETHER VIRTUAL CHANNEL
STRUCTURE CAN REPLACE THE PHYSICAL
STRUCTURE (15 MARKS, JAN 2018)

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 CONTINUE
• DEFINE THE FOLLOWING TERMS AND GIVE EXAMPLE FOR
EACH:
i. SPECIALTY STORE
ii.VENDING MACHINE
iii.HYPERMARKET
iv.WAREHOUSE STORES
v. CONVENIENCE STORES (20 MARKS, DEC 2016)
• WITH THE GROWTH OF POWER RETAILERS IN MALAYSIA, THE
DISTRIBUTION CHANNEL ALSO UNDERGOES CHANGES IN
THE STRUCTURE AND FUNCTIONS.
A) BRIEFLY EXPLAIN POWER RETAILERS. (5 MARKS, DEC 2015)
B) ELABORATE ANY FOUR (4) ADVANTAGES AND FOUR (4)
DISADVANTAGES OF POWER RETAILER. PROVIDE RELEVANT 34

EXAMPLES TO SUPPORT YOUR ANSWER. (20 MARKS, DEC 2015)

THANK YOU

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