Retailing & Wholesaling

Chapter 13

Top 10 Retailers in AmericaSales

(in billions)Change(00-01)

Wal-Mart $ 193.295 +15.9%12 Kroger $ 49.000 +8.0%3 $ 45.738 +19.0%Home Depot4 Sears $ 40.937 +3.7%5 $ 37.028 +3.1%K-Mart6 Albertson’s $ 36.762 -1.9%7 Target $ 36.362 +9.5%

9 $ 32.164 +17.1%Costco10 Safeway $ 31.976 +10.8%

8 J.C. Penny $ 32.649 +0.4%

http://www.stores.org/archives/2001top100_1.html

What is Retailing?Retailing - Includes all the activities Involved in

Selling Goods or Services Directly to Final Consumers for Their Personal, Non-business Use.

Retailing can be done in stores (store retailing) or out of a store (nonstore retailing) such as:

Direct mail Catalogs Telephone

Home shopping shows Internet

Top 10 Internet Retailers

US SaleseBay $ 3.5-3.7B1

Amazon.com2 $ 1.7-1.9BDell3 $ 1.1-1.3B

http://www.stores.org/eng/archives/00top100int_1.html

Gateway6 $ 5-600M

4 $ 7-800MBuy.com5 $ 5-600MEgghead.com

7 Quixtar $ 4-450MuBid8 $ 275-325M

Barnes & Noble9 $ 275-325M10 Outpost $ 2-250M

Amount of ServiceSelf-Service, Limited-Service and

Full-Service RetailerProduct Line

Length and Breadth of the ProductAssortment

Relative PricesPricing Structure that is Used

by the RetailerRetail Organizations

Independent, Corporate, or ContractualOwnership Organization

Classification of Retailing

Classification of Retailing: Amount of Service

Self-Service RetailerSelf-Service RetailerProvide Few or No

Services to Shoppers

Limited-Service RetailersLimited-Service RetailersProvide Only a Limited Number of Services to

Shoppers

Full-Service RetailersFull-Service RetailersRetailers that Provide a Full

Range of Services to Shoppers

Department Stores

Wide Variety of Product Lines i.e. Clothing, Home

Furnishings,…

SupermarketsWide Variety of Food, Laundry, & Household

Products

Convenience Stores

Limited Line of High-Turnover Convenience

Goods

Specialty Stores

Narrow Product Line, Deep Assortment

Classification of Retailing:Product Line (Tab. 13.1)

Store Description

Off-Price Retailers

Changing Collection of Higher-Quality Goods at a

Reduced Price

Warehouse Clubs

Limited Selection of Brand-Name Grocery

Items, Appliances

SuperstoresLarge Assortment of Routinely Purchased

Food & Nonfood Products

Classification of Retailing:Product Line (Tab. 13.1)

Store Description

Discount Stores

Standard Merchandise at Lower Prices

                                      

Low Prices and Offer Lower-Quality Goods and Little Customer Service

Discount Stores

“Off-Priced” Retailers

CatalogShowrooms

Higher Prices and Offer Higher-Quality Goods and Superior Customer Service

Regular Prices and Offer Normal-Quality Goods and Average Customer Service

Classification of Retailing:Relative Prices

Voluntary Chain

Franchise OrganizationsRetailer

Cooperatives

Merchandising Conglomerates

Classification of Retailing:Retail Organization

Corporate Chain

Retailer Marketing Decisions (Fig. 13.1)

Retailer Strategy• Target Market• Retail Store

Positioning

RetailerMarketing Mix•Product and service assortment•Prices•Promotion•Place (location)

Product Assortment and Services Decisions

Product Assortment• Width and Depth of Assortment• Quality of Products• Product Differentiation Strategies

Services MixKey Tool of Non-price Competitionfor Setting One Store Apart From

Another

Store’s Atmosphere• Physical Layout• “Feel” That Suits the Target Market and Moves Customers to Buy

Retailer’s Price, Promotion, & Place Decisions

Price Decisions

Target Market, Product & Service

Assortment, Competition

Promotion Decisions

Using Advertising, Personal Selling, Sales

Promotion, Public Relations, & Direct Marketing to Reach

CustomersPlace DecisionsShopping Centers, Central Business Districts, or

Power Centers, or Online Shopping

New Retail Forms and Shortening Retail Lifecycle

Growth of Non-store RetailingIncreasing Intertype Competition

Growing Importance of Retail TechnologyGlobal Expansion of Major RetailersRetail Stores as “Communities” or “Hangouts”

Rise of the Megaretailer

The Future of Retailing

1 = Discount2 = Superstore3 = Warehouse Club4 = Combination Store

4321

1

23

3 2

1

High MarginHigh PriceHigh Status

Low MarginLow PriceLow Status

The Wheel of Retailing

ELECTRONIC COMMERCE

DEFINITION:Exchange of information, goods, service, and payments by electronic means.

History of E-CommerceE-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers. This process is called Electronic Data Interchange (EDI).Prodigy was running text ads and selling flowers in the early '80s. The first documented Online sale in 1994 was what?A CD

E-Commerce TodaySome major product categories have paved the way:

travel services ($5.95 billion in 1999 sales), computer hardware and software ($5.8 billion), books ($1.7 billion), gifts and flowers ($730 million), music ($540 million), and apparel and footwear ($460 million),

(eMarketer in Business 2.0 Jan 2000).

E-Commerce Services Today

In 1999, the online market size for business services was estimated at $22 billion. Primary service categories include financial ($7.3 billion, 1999), professional ($4.4 billion), administrative support ($3.9 billion), corporate travel ($5 billion), and telecommunications ($1.5 billion).

By 2003, Forrester Research predicts that online services will represent nearly 8 percent of the overall sector hardly a drop in the bucket.

Future of E-CommerceeMarketer, an Internet technology (IT) research and reporting firm, estimates that the dollar figure for e-commerce will rise from approximately U.S. $18 billion in 1998 to U.S. $294 billion in 2002. US Or maybe $184 billion by 2004.(Forrester, Business 2.0 Jan 2000)

In Europe, consumers' internet purchases will jump from: US $2.9 billion in 1999 to US $174 billion in 2005.

Online business-to-business e-commerce is projected to speed past $1 trillion in annual revenue by 2003

Future Trends to Watch in E-Commerce

Women take control. Women make or influence 80 percent of household sales in the United States, according to WomanTrend, despite the fact that they make up 51 percent of the population. The untapped get tapped. Two highly touted markets $509 million health and beauty, and $513 million grocery still lag behind expectations. More "click and mortar." Traditional retailers Circuit City, Crate and Barrel, Sears, Toys R Us, Wal-Mart, and Federated Department Stores missed the boat in 1995 and 1996, but rest assured they "get it" now, and are attempting re-entry, this time around with more money and smarts. Watch out.

Still a Long Way To GoAndersen Consulting and Forrester Research both show shopping cart abandonment rates of 25%.E-commerce still accounts for less than 1% of total retail salesPure plays are struggling to maintain cash flow and are either: Folding Cutting back Being bought at cheap prices

Security Issues are Important

Discussion ConnectionsOnline retailers provide an alternative to shopping the old fashioned way.Discuss the differences in shopping for books and music at www.Amazon.com vs. Barnes & Noble Booksellers.Discuss the differences in shopping for groceries at www.peapod.com vs. your local grocery store.Which do you prefer and why?

What is Wholesaling?All the activities involved in selling goods and services to those buying for resale or business use.Wholesaler - those firms engaged primarily in wholesaling activity.Wholesalers buy mostly from producers and sell mostly to: Retailers, Industrial consumers, and Other wholesalers.

Why are Wholesalers Used?Wholesalers are Often Better at Performing One

or More of the Following Channel Functions:

WholesalerFunctions

ManagementServices & Advice

Selling andPromoting

MarketInformation

Buying andAssortment Building

Risk Bearing Bulk Breaking

Transportation

Financing Warehousing

Types of WholesalersMerchant WholesalerIndependently Owned Business that Takes Title to the Merchandise it Handles.

Brokers/ AgentsThey Don’t Take Title

to the Goods, and They Perform Only a

Few Functions.Manufacturers’ Sales Branches and OfficesWholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

Wholesaler Marketing Decisions (Fig. 13.1)

Wholesaler Strategy• Target Market• Service

Positioning

WholesalerMarketing Mix• Product and

service assortment• Prices• Promotion• Place (location)

Consolidation within the Industry is Reducing # of Wholesalers

Distinction Between Large Retailers and Wholesalers Blurs

Wholesalers Will Continue to Increase the Services Provided

Wholesalers Are Beginning to Go Global

Trends in Wholesaling