PowerPoint by Yu Hongyan Business School of Jilin Universit

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Chapter 15

Managing Managing Retailing, Retailing,

Wholesaling, and Wholesaling, and

Market LogisticsMarket Logistics

Objectives

• Retailing

• Wholesaling

• Logistic

1. Retailing

Retailing Basics

• Types of retailers• Marketing decisions• Retailing trends

• Retail life cycle• Wheel-of-retailing• Service levels• Retail positioning strat

egies• Nonstore retailing• Corporate retailing

1. Retailer (cont’d)

• What means retailer? – A retailer is any business enterprise whose sales

volume comes primarily from retailing

Specialty StoresSpecialty Stores

Department StoresDepartment Stores

SupermarketsSupermarkets

Convenience StoresConvenience Stores

Off-Price RetailerOff-Price Retailer

SuperstoresSuperstores

Catalog ShowroomCatalog Showroom

Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items

Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items

Wide Variety of Food, Laundry, & Household Products

Wide Variety of Food, Laundry, & Household Products

Limited Line of High-Turnover Convenience Goods

Limited Line of High-Turnover Convenience Goods

Inexpensive, Overruns, Irregulars, and Leftover Goods

Inexpensive, Overruns, Irregulars, and Leftover Goods

Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services

Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services

Broad Selection, Fast Turnover, Discount Prices

Broad Selection, Fast Turnover, Discount Prices

Narrow Product Line, Deep AssortmentNarrow Product Line, Deep Assortment

Store Type Length and Breadth of Product Assortment

Discount StoresDiscount Stores Broad Product Line, Low Margin, High Volume

Broad Product Line, Low Margin, High Volume

1. Retailer (cont’d)

Retailing

• Retail-store types pass through the retail life cycle.

Low PriceLow StatusLow Margin

Mid PriceMid StatusMid Margin

High PriceHigh StatusHigh Margin

Wheel of Retailing

• .

1. Retailer (cont’d)

• Four Levels of Retail Service – Self-service

• Locate, compare, and select process

– Self-selection• Find, and can ask help

– Limited-service• Need more information and assistance

– Full-service

Discussion Scenario

“Catalogue retailers,” popular in the 1980’s, are now all but extinct. Customers at such stores would view display items in a showroom, submit “tickets” listing desired items to clerks, and await delivery of their purchases at checkout via conveyor belt.

What retail form precipitated the decline of catalogue retailers? Can you identify an emerging retail form or one that is in decline?

Bloomingdale’s卓展

Sunglass HutShoe

Wal-Mart卖场

TiffanySpecialty Nike

BroadBroad

NarrowNarrow

Bre

adth

of

Bre

adth

of

pro

du

ct li

ne

pro

du

ct li

ne

Value addedValue addedLowLowHighHigh

Retail Positioning Map

1. Retailer (cont’d)

• Four broad retail positioning strategies include:– Bloomingdale’s– Tiffany– Sunglass Hut– Wal-Mart

• Non-store retailing has been growing faster than store retailing

Direct SellingDirect Selling

Direct MarketingDirect Marketing

Buying Services 安 利Buying Services 安 利

NonStore Retailing Accounts for More

Than 12% of All Consumer

Purchases, and is trending up.

Automatic VendingAutomatic Vending

1. Retailer (cont’d)

Type of nonstore retailing

1. Retailer (cont’d)

Retailing Basics

• Types of retailers• Marketing decisions• Retailing trends

• Target market• Product assortment and

placement• Services mix and store

atmosphere• Price• Promotion==• Place

Promotion

• Advertising • Special sales• Money saving coupons• Frequent shopper rewards• In store sampling• In store coupon• Rebate • Any more?

Retailing

General Business

District

Regional Shopping

Center

Community Shopping

Center

Strip mall (Shopping

Strip)Location within a larger store or

operation

Location Options for

Retailers

Discussion Scenario

Restaurants such as McDonald’s and Subway have attempted to expand their distribution by opening stores within gas stations, or mass merchandisers such as Wal-Mart. In some instances, stores offer limited menus or drive-thru service only.

Aside from fast food restaurants, what other types of retail businesses have followed a similar strategy?

Retailing

Retailing Basics

• Types of retailers• Marketing decisions• Retailing trends

• New retail forms

• Intertype competition

• Growth of giant retailers

• Technology

• Global expansion

• Selling experiences

• Competition between store-based and non-store-based retailing

2. Wholesaling

Wholesaling

• Wholesaling basics • Types of wholesalers• Marketing decisions• Wholesaling trends

• Wholesaling excludes manufacturers, farmers, and retailers

• Wholesalers differ from retailers in three key ways

• Wholesalers handle many functions more efficiently than do manufacturers

2. Wholesaling (cont’d)

• 1. The Definition of Wholesaling – Wholesaling includes all the activities involved

in selling goods or services to those who buy for resale or business use.

– Wholesale excludes manufactures and farmers because they are engaged in production

2. Wholesaling (cont’d)

• Difference between R and W – Wholesale pay less attention to promotion, atmosphere

and location because they are dealing with business customers rather than final consumer

– Wholesale are usually larger than retail transaction, and cover a larger trade areas than retailers

– The government deals with wholesalers and retailer differently regards legal regulations and tax

WholesalerFunctions

ManagementServices & Advice

ManagementServices & Advice

Selling andPromoting

Selling andPromoting

MarketInformation

MarketInformation

Buying andAssortment Building

Buying andAssortment Building

Risk BearingRisk Bearing Bulk BreakingBulk Breaking

TransportingTransporting

FinancingFinancing WarehousingWarehousing

Why Are Wholesalers Used?

2. Wholesaling (cont’d)

• 2. The Growth of Wholesaler – Growth of larger factories located some

distance from the principal buyers– Production in advance of orders rather than in

response to specific orders– Increase in the number of levels of intermediate

producer and user

2. Wholesaling (cont’d)

Warehousing

Buying and Assortment Building

Selling andPromoting

Risk Bearing Bulk breaking

Transportation

Financing

Market Information

Wholesaler Wholesaler FunctionsFunctions

2. Wholesaling (cont’d)

Wholesaling

• Wholesaling basics• Growth and types

of wholesalers• Marketing decisions• Wholesaling trends

• Wholesalers vary in type and function

• Wholesaling has been growing due to two key factors:– Many factories are located far

from buyers

– An increasing need to adapt product quantities, features, or packages to meet buyer needs

2. Wholesaling (cont’d)

• Merchant wholesalers

• Full-service wholesalers

• Limited-service wholesalers

• Brokers & agents

• Brokers• Agents• Manufacturers’ and

retailers’ branches and offices

• Miscellaneous wholesalers

Major Wholesaler Types

2. Wholesaling (cont’d)

Wholesaling

• Wholesaling basics• Types of wholesalers• Marketing decisions• Wholesaling trends

• Target market

• Product assortment and placement

• Price

• Promotion

• Place

2. Wholesaling (cont’d)

Wholesaling

• Wholesaling basics• Types of wholesalers• Marketing decisions• Wholesaling trends

• Direct buying trends initially threatened wholesalers

• Wholesalers have adapted by:– Adding value– Reducing costs– Strengthening

relationships with manufacturers

3. Market Logistics

OffsetOffset

Compensation DealCompensation Deal

Interrelated Aspects of Market Logistics

Market LogisticsMarket Logistics

Physical DistributionPhysical Distribution

Supply Chain ManagementSupply Chain Management

Demand Chain PlanningDemand Chain Planning

Integrated Logistics SystemsIntegrated Logistics Systems

Value NetworkValue Network

3. Market Logistics (cont’d)

McKesson offers online supply management

3. Market Logistics (cont’d)

Key Elements

• Market-logistics objectives

• Market-logistics decisions

• Market logistics lessons

• Logistics involve trade-offs between costs and customer service

• Maximizing profits, not sales, is key

• A total system basis should be considered

• Designing a system that will minimize the cost of achieving objectives should be the outcome

3. Market Logistics (cont’d)

M = T + FW + VW + S

Where . . . M = total market-logistics cost of proposed system; T = total freight cost of proposed system;FW = total fixed warehouse cost of proposed system;VW = total variable warehouse cost of proposed system S = total cost of lost sales due to average delivery delay

Calculating the Cost of Market-Logistics Systems

3. Market Logistics (cont’d)

Key Elements

• Market-logistics objectives

• Market-logistics decisions

• Market logistics lessons

• Order processing

• Warehousing– Storage, distribution,

automated warehouses

• Inventory– Determine reorder point,

relevant cost comparison, optimal order quantity

• Transportation– Containerization

– Private vs. contract carriers

InventoryWhen to order

How much to orderJust-in-time

InventoryWhen to order

How much to orderJust-in-time

CostsMinimize Costs ofAttaining Logistics

Objectives

CostsMinimize Costs ofAttaining Logistics

Objectives

WarehousingStorage

Distribution

WarehousingStorage

Distribution

Order ProcessingSubmittedProcessed

Shipped

Order ProcessingSubmittedProcessed

Shipped

Logistics

FunctionsTransportation Water, Truck,

Rail, Pipeline & Air

3. Market Logistics (cont’d)

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

WaterLow cost for shipping bulky, low-value

goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

Transportation Modes

3. Market Logistics (cont’d)

Key Elements

• Market-logistics objectives

• Market-logistics decisions

• Market logistics lessons

• A senior V.P. is needed as the single contact point for all logistical elements

• Senior V.P. must maintain close control

• Software and systems are essential for competitively superior logistics performance

Review

• Retailing

• Wholesaling

• Logistics