Chapter Eleven

1
Chapter Eleven

• Retailing and Wholesaling

2
What Is Retailing?

• Retailing
• includes all the activities involved in selling
  products or services directly to final consumers
  for their personal, non-business use.
• Most retailing is done by retailers, but nonstore
  retailing has recently grown by leaps and bounds.

3
Types of Retailers

• Retailers are classified based on
• Amount of service they offer
• Breadth and depth of product lines
• Relative prices charged
• How they are organized

4
Amount of Service

• Self-Service Retailers
• Serve customers who are willing to perform their
  own locate-compare-select process to save
  money.
• Limited-Service Retailers
• Provide more sales assistance because they carry
  more shopping goods about which customers need
  information.
• Full-Service Retailers
• Usually carry more specialty goods for which
  customers like to be waited on.

5
Major Store Retailer Types

• See table 11-1
• Specialty stores
• Limited product line, but an unique assortment,
  usually smaller stores with a distribution
  personality. Knowledgeable sales clerks, and
  good serviceHelzberg.
• Department stores
• Large stores, many separate departments, each
  with limited product lines. Usually strong in
  customer service-credit, merchandise return,
  delivery, and sales consistence Jones Store,
  Dillard, Halls Crown Center, JC Penney.
• Supermarkets
• Category Killers

6
Major Store Retailer Types

• Supermarkets
• Large stores specializing in groceries, primarily
  self-service with wide assortments. Profits come
  from volume, most from high markup.
• Category Killers
• Giant specialty stores that carry deep
  assortments of particular lines of a wide range
  of category books, baby gear, toys, home
  improvement Home Depot, Lowes
• Convenience stores
• Limited lines of high-turnover convenience goods,
  gasoline, tobacco, beverages, and snack items
  Quick Trip, Conoco convenience store
• Superstores
• Large stores that sell large assortments of
  routinely sold food products, non-food products,
  and services

7
Relative Prices Classification

• See table 11-1.
• Most retailers charge regular/average prices
  for average quality and service. Increases in
  either or both will usually increase retail
  prices accordingly.
• Discount stores
• Sell standard merchandise at lower prices by
  accepting lower cost form manufactures and
  selling at lower margins at higher volumes
  Wal-Mart, Target, Kmart, and Circuit City.

8
Relative Prices Classification

• Off-price retailers
• Independent off-price retailers
• Buy at less then regular wholesale prices and
  less then normal retail or by divisions of large
  retail corporations TJ Maxx, Half Price Stores,
  and Marshalls
• Factory outlets
• Producer operated stores Liz Claiborne, Carters,
  Levi Strauss
• Factory outlet malls
• Value-retail centers

May be clearance outlets selling out of style,
overstock merchandise. Many mall outlets are
combined manufacturer/retailer stores.
Department store outlets of specialty goods
naturally charge higher prices. Outlet brands
include Nordstrom, Neiman Marcus, Saks, Fifth
Avenue, Coach, Polo, Ralph Lauren, Gucci,
Georgia Armani
9
Relative Prices Classification

• Warehouse club
• Appeal to variety of customer types, with large
  variety of products from food to furniture to
  appliances. Usually have deep discounts and a
  variety of marketing mixes Sams Club, Costco

10
Organizational Classification

• Corporate chain stores
• Owned and operated, usually with central buying
  similar lines of merchandise Sears, CVS,
  Williams-Sonoma, Tower Records, Pottery Barn.
• Voluntary chain
• Wholesaler-sponsored groups of independent
  retailers engaged in bulk buying and common
  merchandising IGA, Sentry Hardware, True Value
  Hardware.

11
Organizational Classification

• Retailer cooperative
• Groups of independent retailers who set up a
  central buying organization and conduct joint
  promotional efforts. Associated Grocers, Ace
  Hardware.
• Franchise
• Contractional relationship between a
  manufacturer, wholesaler, or service and a
  retailer which buys the right to one or more
  franchise owner may be manufacturer,
  wholesaler or service McDonalds, Pizza Hut,
  Jiffy Lube
• Merchandising conglomerates
• Corporate entities that own, run, and manage
  several widely diverse/different (product or
  service) franchises, along with some integration
  of their distribution and management functions
  Target Corporation.

12
Retailer Marketing Decisions

• Retailer Strategy
• Target market
• Retail store positioning
• Until retailers define and profile their markets,
  retailers cannot make meaningful decisions
  related to the retailer marketing mix.

13
Retailer Marketing Decisions

• Retailer Marketing Mix
• Product assortment and services
• Price
• Promotion
• Place (location)

14
Assortment and Service Decisions

• Product assortment
• Should differentiate the retailer while matching
  target shoppers expectations
• Services mix
• Store atmosphere
• Physical layout can help/hinder shopping
• Experiential retailing helps sell goods
• Unusual, exciting shopping environments are
  becoming more common

15
Price and Promotion Decisions

• Price policy must fit its target market and
  positioning, product and service assortment, and
  competition.
• Can use any or all of the promotion
  toolsadvertising, personal selling, sales
  promotion, public relations, and direct
  marketingto reach consumers.

16
Place Decisions

• Retailers can locate in central business
  districts, various types of shopping centers,
  strip malls, or power centers.
• Location is key to success.

17
The Future of Retailing

• New Retail Forms and Shortening Retail Life
  Cycles
• Growth of Nonstore Retailing
• Retail Convergence
• Rise of the Megaretailers

• Growing Importance of Retail Technology
• Global Expansion of Major Retailers
• Retail Stores as Communities or Hangouts

18
Wholesaling

• Wholesaling
• includes all activities involved in selling goods
  and services to those buying for resale or
  business use.
• Wholesalers add value for producers by performing
  one or more channel functions.

19
Functions Provided by Wholesalers

• Financing
• Risk bearing
• Market information
• Management services and advice

• Selling and promoting
• Buying and assortment building
• Bulk-breaking
• Warehousing
• Transportation

20
Types of Wholesalers

• Merchant Wholesalers
• Largest group of wholesalers
• Account for 50 of wholesaling
• Two broad categories
• Full-service wholesalers
• Limited-service wholesalers

21
Types of Wholesalers

• Brokers and Agents
• Do not take title to goods
• Perform fewer functions
• Brokers bring buyers and sellers together
• Agents represent buyers on more permanent basis
• Manufacturers agents are most common type of
  agent wholesaler

22
Types of Wholesalers

• Manufacturers Sales Branches and Offices
• Wholesaling by sellers or buyers themselves
  rather than through independent wholesalers.

23
Wholesaler Marketing Decisions

• Wholesaler Strategy
• Target market
• Service positioning
• Wholesaler Marketing Mix
• Product assortment and services
• Price
• Promotion
• Place (location)

24
Trends in Wholesaling

• Fierce resistance to price increases.
• Winnowing out of suppliers who are not adding
  value based on cost and quality.
• Distinction between large retailers and
  wholesalers is blurry.
• Will continue to increase the services provided
  to retailers.
• Wholesalers are now going global.

25
Case Study
Whole Foods Market Finding Its Niche

• Whole Foods Market
• Has 170 stores worldwide with 4 billion in sales
  vs. 5000 stores and sales of 285 billion for
  Wal-Mart.
• Offers organic, natural, and gourmet foods.
• Positions itself AWAY from Wal-Mart Whole
  Foods, Whole People, Whole Planet.

• Marketing Efforts
• Web site reinforces the companys positioning.
• Caters to health conscious, affluent, liberal,
  educated consumer base.
• Both in-store and online shopping is a customer
  experience.
• Cares about employees, customers, community.