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ChapterChapter 1818

Managing Retailing, Wholesaling, Managing Retailing, Wholesaling, and Market Logisticsand Market Logistics


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Successful “go-to-market” strategies require integrating retailers, wholesalers, and logistical organizations.

Kotler on Kotler on MarketingMarketing


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Chapter ObjectivesChapter Objectives

• In this chapter, we focus on the following questions about each marketing intermediary:– What major types of organizations

occupy this sector?– What marketing decisions do

organizations in this sector make?– What are the major trends in this sector?


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RetailingRetailing

• Types of Retailers• Retail life cycle

– Pass through stages of growth & decline

– Older retail forms took many years to reach maturity

– Newer retail forms reach maturity much more quickly


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Major Retailer TypesMajor Retailer Types

Specialty Store: Narrow product line with a deep assortment. 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 superspecialty store. E.g. The Body Shop.

Department Store: Several product lines—typically clothing, home furnishings, and household goods—with each line operated as a separate department managed by specialist buyers or merchandisers.

Supermarket: Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry, and household products.

Convenience Store: Relatively small store located near residential area, open long hours, seven days a week, and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee.


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RetailingRetailing

– Levels of Service• Wheel-of-retailing

– Conventional retail stores increase their services & raise prices to cover costs, this provide opportunity for new store forms to offer lower prices & less service, ultimately meeting different consumer preferences.

• Four levels of service:– Self-service

– Self-selection

– Limited service

– Full service

» Sales people are ready to assist in every phase of the locate compare select process.


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RetailingRetailing

• Nonstore retailing (telemarketing & Internet Selling)

• Categories of nonstore retailing– Direct selling

– Direct marketing

» Telemarketing

» Television direct-response marketing (tele brands)

» Electronic shopping (Amazon.com)

– Automatic vending

– Buying service (Storeless retailer serving a specific clientele)

• Corporate Retailing (PSO Company operated outlets)


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Major Types of Retail OrganizationsMajor Types of Retail Organizations

Corporate Chain Store: Two or more outlets commonly owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Their size allows them to buy in large quantities at lower prices, and they can afford to hire corporate specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting.

Voluntary Chain: A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising.

Retailer Cooperative: Independent retailers who set up a central buying organization and conduct joint promotion efforts.

Consumer Cooperative: A retail firm owned by its customers. In consumer coops residents contribute money to open their own store, vote on its policies, elect a group to manage it, and receive investment dividends.


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RetailingRetailing

• Marketing Decisions

• Target Market

• Product Assortment and Procurement• Breadth

• Depth


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RetailingRetailing

• Trends in Retailing1. New retail forms and combinations

2. Growth of intertype competition

3. Growth of giant retailers

4. Growing investment in technology

5. Global presence of major retailers

6. Selling an experience, not just goods

7. Competition between store-based and non-store-based retailing


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WholesalingWholesaling

– Wholesalers’ functions:• Selling and promoting

– Wholesalers sales force help manufacturers reach many small business customers at low cost.

• Buying and assortment building– Select items & build the assortments their customer need

saving the customers considerable work.

• Bulk breaking– Achieve saving for their customers by buying in bulk &

breaking bulk in smaller units.

• Warehousing– Holding inventories thereby reducing inventory costs &

risks to suppliers & customers.


• Transportation– Provide quicker delivery to buyers as they are close to buyers.

• Financing– Finance customers by granting credit & finance suppliers by ordering

early & paying bills on time

• Risk bearing– Absorb risk by taking title & bearing the cost of theft, damage, spoilage

& obsolescence.

• Market information – Supply information to suppliers & customers regarding competitors.

• Management services and counseling– Help retailers improve their operations by training sales clerks, helping

in store layouts & displays.18-12



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Major Wholesaler TypesMajor Wholesaler Types

Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. They are called jobbers, distributors, or mill supply houses and fall into two categories: full service and limited service.

Full-Service Wholesalers: Carry stock, maintain a sales force, offer credit, make deliveries, and provide management assistance.

There are two types of full-service wholesalers: (1) Wholesale merchants sell primarily to retailers and provide a full range of services.

(2) Industrial distributors sell to manufacturers rather than to retailers and provide several services—carrying stock, offering credit, and providing delivery.


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• Wholesaler Marketing Decisions

– Target Market– Product Assortment and Services– Price Decision– Promotion Decision– Place Decision


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• Trends in Wholesaling– Four ways to strengthen relationships with

manufacturers• Sought clear agreement about their expected function

in the marketing channel

• Gained insight into the manufacturers’ requirements by visiting their plants

• Fulfill commitments by meeting volume targets

• Identify and offer value-added services to help their suppliers


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Market LogisticsMarket Logistics

• Supply chain management (SCM)– Involves procuring right inputs, converting them efficiently into

finished products & dispatching them to final destinations.

• Value network

• Demand chain planning– Company should first think of the target market & then design the

supply chain backward to that point.

• Market logistics– Involves planning the infrastructure to meet demand, then

implementing & controlling the physical flows of materials & final goods from points of origin to the points of use, to meet customer requirements at profit.


– Market logistics planning has four steps:

» Deciding on the company’s value proposition to its customers

» Deciding on the best channel design and network strategy for reaching the customers

» Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management

» Implementing the solution with the best information systems, equipment, policies, and procedures

• Integrated logistics systems (ILS)– Involves materials management, material flow systems & physical

distribution supported by information technology.

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• Market-logistics Objectives• Maximizing customers service & minimizing

distribution cost is not simultaneously possible.

• Market-logistics Decisions– Order Processing

– Most companies are trying to shorten the order to payment cycle.

• Order-to-payment cycle

– Warehousing– Production & consumption cycles rarely match.


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– Inventory

• Inventory cost increases at an accelerating rate as the customer service level approaches 100%.

• Order (reorder) point» Management must know at what stock level to place a new order.

• Order-processing costs» How much to order, the larger the quantity ordered, the less

frequently an order has to be placed. The company needs to balance order-processing costs & inventory carrying costs.

• Inventory-carrying costs» Larger the average stock carried, higher the inventory carrying

cost.



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• Just-In-Time production (JIT)

– Transportation• Containerization

– Piggyback: Use of rail & trucks

– Fishyback: Water & trucks

– Trainship: Water & rail

– Airtruck: Air & trucks

– Private carrier

– Contract carrier

– Common carrier: Provides services between predetermined points on a scheduled basis & is available to all shippers at standard rates.


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– Organizational Lessons

• Companies should appoint a senior vice president of logistics to be the single point of contact for all logistical elements

• The senior vice president of logistics should hold periodic meetings with sales and operations people to review inventory, etc.

• New software and systems are the key to achieving competitively superior logistics performance in the future

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