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Retailing and Wholesaling

13

Principles of Marketing

Learning Objectives

After studying this chapter, you should be able to:

1. Explain the roles of retailers and wholesalers in the distribution channel

2. Describe the major types of retailers and give examples of each

3. Identify the major types of wholesalers and give examples of each

4. Explain the marketing decisions facing retailers and wholesalers

13-2

Chapter Outline

1. Retailing

2. Wholesaling

13-3

Retailing

Retailing includes all the activities in selling

products or services directly to final consumers for their personal, non-business

use

Retailers are businesses whose sales come

primarily from retailing

13-4

Retailing

Non-store retailing includes selling to final consumers through:

• Direct mail

• Catalogs

• Telephone

• Internet

• TV shopping

• Home and office parties

• Door-to-door sales

• Vending machines 13-5

Retailing

Types of Retailers

Classified in terms of:

• Amount of service

• Product lines

• Relative price

13-6

Retailing

Types of Retailers

Amount of service

• Self service

• Limited service

• Full service

13-7

Retailing

Types of Retailers

Amount of Service

Self-service retailers serve customers who

are willing to perform their own locate-compare-select process to save money

• Wal-Mart

• Supermarkets

13-8

Retailing

Types of Retailers

Amount of Service

Limited service retailers provide more sales assistance because they carry more shopping goods about which customers need more information

• Sears

• JC Penney

13-9

Retailing

Types of Retailers

Amount of Service

Full-service retailers assist customers in every phase of the shopping process, resulting in higher costs that are passed on to the customer as higher prices

• Department stores

• Specialty stores

13-10

Retailing

Types of Retailers Amount of Service

Specialty stores carry narrow product lines with deep assortments within the product lines

Department stores carry a wide variety of product lines

Convenience stores carry a limited line of high-turnover convenience goods

13-11

Retailing

Types of Retailers

Amount of Service

Superstores offer a large assortment of routinely purchased food products, no food items, and services

• Supercenters have very large combination food and discount stores

13-12

Retailing

Types of Retailers

Amount of Service

Category killers are large stores that carry a very deep assortment of a particular line with a knowledgeable staff

Service retailers’ product lines are actually service

13-13

Retailing

Types of Retailers

Relative Prices

• Discount stores

• Office price retailers

• Factory outlets

• Warehouse clubs

13-14

Retailing

Types of Retailers Relative Prices

Discount stores sell standard merchandise at lower

prices by accepting lower margins and selling higher volume

Off-price retailers buy at less than regular wholesale

prices and charge customers less than retail • Independent off-price retailers either are owned

and run by entrepreneurs or are divisions of larger retail corporations

13-15

Retailing

Types of Retailers

Relative Prices

Factory outlets are producer-operated stores

Warehouse clubs are large warehouse-like facilities with few frills and offer ultra-low

prices

13-16

Retailing

Types of Retailers

Organizational Approach

• Corporate chain stores

• Voluntary chain stores

• Retailer cooperatives

• Franchise organizations

• Merchandising conglomerates

13-17

Retailing

Types of Retailers


Corporate chains are two or more outlets that

are commonly owned and controlled

• Size allows them to buy in large quantities at lower prices and gain promotional economies

• Sears

• CVS

13-18

Retailing

Types of Retailers


Voluntary chains are wholesale-sponsored

groups of independent retailers that engage in group buying and common merchandising

• IGA

• Western Auto

13-19

Retailing

Types of Retailers


Retailer cooperative is a group of independent retailers that band together to set up a joint-owned, central wholesale operation and conduct joint merchandising and promotion effort

• Ace Hardware

• Associated Grocers

13-20

Retailing

Franchise organizations are based on some unique product or service; on a method of doing business; or on the trade name, good will, or patent that the franchisor has developed

• Subway

• Holiday Inn

13-21

Types of Retailers Organizational Approach

Retailing

Types of Retailers


Merchandising conglomerates are

corporations that combine several retailing forms under central ownership

• Limited Brands

13-22

Retailing

Retailer Marketing Decisions

• Target market and positioning

• Product assortment and services

• Price

• Promotion

• Place

13-23

Retailing

Target market and positioning involves the definition and profile of the market so the

other retail marketing decisions can be

made

13-24


Retailing


Product assortment and service decisions include:

• Product assortment

• Services mix

• Store atmosphere

13-25

Retailing


Product assortment should differentiate the retailer while matching target shoppers’ expectations

• Offers merchandise that no other competitor carries • Private or national brands

• Merchandising events

• Highly targeted product assortment

13-26

Retailing


Services mix should also serve to differentiate the

retailer from the competition • Customer support

Store atmosphere is the physical layout that makes

moving around the store hard or easy • Experiential retailing

• Test driving

13-27

Retailing


Price Decision

Price policy must fit the target market and

positioning, product and service assortment, and competition

• High markup on lower volume

• Low markup on higher volume

13-28

Retailing


Price Decision

High-low pricing involves charging higher prices on an everyday basis, coupled with frequent sales and other price promotions to increase store traffic, clear out unsold merchandise, create a low price image, or attract customers who will buy other goods at full price

13-29

Retailing


Price Decision

Everyday low prices (EDLP) involves charging

a constant, everyday low price with few sales or discounts

13-30

Retailing


Promotion Decision

• Advertising

• Personal selling

• Sales promotion

• Public relations

• Direct marketing

13-31

Retailing


Place Decision

• Location

• Accessibility

• Consistent with positioning

13-32

Retailing

Retailer Marketing Decisions Place Decision

Central business districts are located in cities and include department and specialty stores, banks, and movie theaters

Shopping center is a group of retail businesses planned,

developed, owned, and managed as a unit. • Regional shopping centers

• Community shopping centers • Neighborhood shopping centers

• Power centers • Lifestyle centers

13-33

Retailing

The Future of Retailing

Retailers have to choose target segments carefully, position themselves strongly, and consider the following developments as they plan and execute their competitive strategies:

• Non-store retailing

• Retail convergence

• Megaretailers

• Retail technology

• Global expansion

• Retail stores as communities

13-34

Retailing


New Retailing Forms and Shortening Life Cycles

Wheel-of-retailing concept states that many new types of retailing forms begin as low-margin, low-price, low-status operations and challenge established retailers. As they succeed, they upgrade their facilities and offer more services, increasing their costs and forcing them to increase prices, eventually becoming the retailers they replaced.

13-35

Retailing



Growth of non-store retailing includes:

• Mail order

• Television

• Phone

• Online

13-36

Retailing



Retail convergence involves the merging of consumers, producers, prices, and retailers,

creating greater competition for retailers

and greater difficulty differentiating offerings

13-37

Retailing



The rise of megaretailers involves the rise of mass

merchandisers and specialty superstores, the formation of vertical marketing systems, and a rash of retail mergers and acquisitions

• Superior information systems

• Buying power

• Large selection

13-38

Retailing



Retail technology includes video-casts,

inventory control, electronic ordering, transfer of information, scanning, online

transaction processing, improved

merchandise handling systems, and the ability to connect with customers

13-39

Wholesaling

Wholesaling

Wholesalers add value by performing channel functions • Selling and promoting • Buying assortment building • Bulk breaking • Warehousing • Transportation • Financing • Risk bearing • Market information • Management services and advice

13-40

Wholesaling

Wholesaling

Selling and promoting involves the wholesaler’s sales force helping the manufacturer reach many smaller customers at lower cost

Buying and assortment building involves the selection of items and building of assortments needed by their customers, saving the customers work

13-41

Wholesaling

Wholesaling

Bulk breaking involves the wholesaler buying in larger quantity and breaking into smaller lots for its customers

Warehousing involves the wholesaler holding inventory, reducing its customers’ inventory cost and risk

13-42

Wholesaling

Wholesaling

Transportation involves the wholesaler providing quick delivery due to its proximity to the buyer

Financing involves the wholesaler providing credit and financing suppliers by ordering earlier and paying on time

13-43

Wholesaling

Wholesaling

Risk bearing involves the wholesaler absorbing risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence

Market information involves the wholesaler providing information to suppliers and customers about competitors, new products, and price developments

13-44

Wholesaling

Wholesaling

Management services and advice involves

wholesalers helping retailers train their sales

clerks, improve store layouts, and set up accounting and inventory control systems

13-45

Wholesaling

Types of Wholesalers

• Merchant wholesalers

• Agents and brokers

• Manufacturers’ sales branches and offices

13-46

Wholesaling


Merchant wholesalers is the largest group of

wholesalers and include:

• Full-service wholesalers who provide a full

set of services

• Limited-service wholesalers who provide few

services and specialized functions

13-47

Wholesaling


Brokers and agents do not take title, perform

a few functions, and specialize by product

line or customer type

• Brokers bring buyers and sellers together

and assist in negotiations

• Agents represent buyers or sellers

13-48

Wholesaling


Manufacturers’ sales branches and offices

is a form of wholesaling by sellers or buyers

themselves rather than through independent wholesalers

13-49

Wholesaling

Wholesaler Marketing Decisions

• Target market and positioning decisions

• Marketing mix decisions

13-50

Wholesaling


Target market and positioning decisions

• Size of customer

• Type of customer

• Need for service

13-51

Wholesaling


Marketing mix decisions

• Product

• Price

• Promotion

• Place

13-52

Wholesaling

Trends in Wholesaling

Challenges

• Resistance to price increases

• Lack of suppliers

• Changing customer needs

• Adding value by increasing efficiency and effectiveness

13-53

The End

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