Services Retailing: Definition & Difference from Merchandise Retailers

Instructor: Sudha Aravindan

Sudha has a Doctor of Education Degree and is currently working as a Information Technology Specialist.

In this lesson, we will learn about some of the qualities that differentiate service retailers from merchandise retailers including intangibility, simultaneous production and consumption, perishability, and inconsistency of the offering to customers.

Service Retailers and Merchandise Retailers

Joe owns a tennis club and his wife Mary runs a lawn mowing service. Their businesses fall into the category of service retailers because they sell services and not products. The tennis club, for example, offers the availability of tennis courts, observation lounges, and locker rooms. And the lawn mowing service offers exceptional customer care, maintaining perfectly green lawns by offering herbicide application and grounds maintenance.

Both services have the following characteristics: intangibility, simultaneous production and delivery, perishability, and inconsistency in the services offered. If Joe sold tennis apparel or Mary sold lawn mowers, they would be merchandise retailers because they would be selling physical products or merchandise. Their friend Roger wants to learn about starting a service retail business and meets with Mary and Joe to discuss this over dinner.

Intangibility

Roger wants to know if the lawn mowing service has any tangible benefits to customers. Mary explains that she is not selling lawn mowers or herbicide. Instead, hers is a service where she is satisfying a customer need, and the products she offers are not physical products but are intangible.

The product cannot be owned by the customer and assessing the value is more difficult compared to a tangible product. Also, there are no physical characteristics on which to rate the service. If the customer is purchasing a lawn mower, they can feel and touch and test it since it has tangible qualities that can be used for comparison with another product. Since the mowing service is intangible, its value cannot be assessed using tangible evidence. The customer takes a risk in trying the service and they can switch to another service provider.

Simultaneous Production and Delivery

Joe is eager to tell Roger about how his service is all about simultaneous production and delivery because production and consumption (or delivery) cannot be separated. The services are created for the customer as the customer 'consumes' or enjoys the services. The tennis courts are used by the customers, and they are regularly maintained and cleaned of debris.

If Joe, on the other hand, owned a retail tennis store selling tennis related merchandise, he would have products that have to be first produced by the manufacturer in a different location, sold to the customer at the store, and consumed or used by the customer in the customer's environment. In his tennis club, production (maintaining the courts), selling (to make the customer purchase the services) and consumption (use by the customer) all take place with the interaction of the customer and in an environment where the customer is at the center of the interactions.

Perishability

Mary and Joe explain to Roger that the services they offer are perishable in the sense that there is no inventory where services can be stored for future use. If a customer does not avail themselves of the services offered by the tennis court, the time lost cannot be saved and recaptured for the future. If the customer is not happy with the lawn service, the time value assigned to that service call is permanently lost.

So, the services offered are perishable because they cannot be stored like physical lawn movers or tennis rackets. Also, the service cannot be returned once it is availed of by a customer. When the service is complete, the value assigned for that instance of the service disappears - when the lawn mowing is finished, the service is complete and there is no future value for the service. When the players end their play, the service offered for that time slot vanishes.

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