Retailing and Wholesaling Chapter 11. Copyright 2011, Pearson Education Inc., Publishing as...

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Retailing Retailing andand Wholesaling Wholesaling

Chapter 11

Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall 11 - 2

Chapter OutlineChapter Outline

Retailing Retailer Marketing Decisions Retailing Trends and Developments Wholesaling


1. Explain the roles of retailers in the distribution channel and describe the major types of retailers.

2. Describe the major retailer marketing decisions.

3. Discuss the major trends and developments in retailing.

4. Describe the major types of wholesalers and their marketing decisions.

Previewing the ConceptsPreviewing the Concepts


RetailingRetailing

All activities involved in selling All activities involved in selling goods or services directly to goods or services directly to final consumers for their final consumers for their personal, non-business use.personal, non-business use.

Retailers are businesses whose sales come primarily from retailing.


RetailingRetailing

Most retailing is done by retailers, but nonstore retailing has recently grown by leaps and bounds.


RetailingRetailing 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


Types of RetailersTypes of Retailers

The different types of retailers can be classified based on:– The amount of service they offer.– The length, breadth and depth of

product lines carried.– The relative prices charged.– How they are organized.


Types of RetailersTypes of Retailers Classification by the amount of service

offered:– Self-service retailers:

• Serve customers who are willing to perform their own “locate-compare-select” process to save money.

• Wal-Mart, Supermarkets

– Limited-service retailers:• Provide more sales assistance, as they carry more shopping

goods, about which customers need more information.• Sears, Sasa, JC Penney

– Full-service retailers:• Usually carry more specialty goods for which customers

need or want assistance or advice.• 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


Types of RetailersTypes of Retailers Classification by length, breadth &

depth of their product assortments:– Specialty stores:

• Carry narrow product lines, with deep assortments within the product lines (e.g., Radio Shack).

– Department stores: • Offer a wide variety of product lines of clothing,

home furnishings, household goods (e.g., Macy’s).– Supermarkets:

• Usually carry a relatively large variety of low cost, low-margin groceries and consumables (e.g., Kroger, Safeway).


Types of RetailersTypes of Retailers Classification by length, breadth &

depth of their product assortments:– Convenience stores:

• Carry a limited line of high turnover convenience goods (e.g., Circle K, 7-Eleven).

– Superstores: • Much larger than regular supermarkets,

superstores offer a large of assortment of routinely purchased food goods, nonfood items, and services (e.g., Wal-Mart Supercenter; Best Buy).

• Category killers are really giant specialty stores that carry a very deep assortment of a particular line with knowledgeable staff.


Types of RetailersTypes of Retailers Classification by relative prices charged:

– Discount stores: • Sell standard merchandise at lower prices and margins, in

return for higher volume.– Off-price retailers:

• Buy merchandise at less-than-regular wholesale prices which are sold at less than retail. Goods include overruns, irregulars, and leftovers.

• Includes independent off-price retailers, factory outlets and warehouse / wholesale clubs.

– Factory outlets are producer-operated stores.

– Warehouse clubs are large, warehouse-like facilities with few frills and offer ultra-low prices.


Marketing in ActionMarketing in Action

Wal-Mart’s low-price value proposition and streamlined cost structure has helped make them the world’s largest retailer. Sales of toys and pet supplies top those of category killers.


Types of RetailersTypes of Retailers Classification by major retail organization

types:– Corporate chain stores

• 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 – Watsons

– Voluntary chain:• Wholesaler-sponsored group of independent retailers

engaged in group buying and merchandising.


Types of RetailersTypes of Retailers Classification by major retail organization

types:– Retailer cooperative:

• Group of independent retailers who band together to set up a jointly-owned, central wholesale operation and to conduct joint merchandising & promotion efforts.

– Franchise organization:• Contractual association between a franchisor and

franchisees. Based:– On some unique product or service– On a method of doing business– On the trade name, good will, or patent that

the franchisor has developed• McDonald’s, Pizza Hut, etc.


Figure 11.1:Figure 11.1:

Retailer Marketing Retailer Marketing Decisions/StrategiesDecisions/Strategies


Retailer Marketing DecisionsRetailer Marketing Decisions Retail Strategy:

– Segmentation and targeting– Store differentiation and positioning

Target market and positioning involves the definition and profile of the market so the other retail marketing decisions can be made.– Retailers cannot make meaningful decisions

related to the retail marketing mix until they first define and profile their target market.



By positioning itself strongly away from Wal-Mart and other discounters, Whole Foods Market has made itself one of the nation’s fastest-growing and more profitable food retailers. Whole Foods Market focuses on selling high-quality natural and organic foods.

http://www.wholefoodsmarket.com/


Retailer Marketing DecisionsRetailer Marketing Decisions

Retail marketing mix:– Product and service assortment.– Retail prices.– Promotion.– Distribution (location).

The retail strategy and retail marketing mix must combine to create value for targeted retail customers.



Retail marketing mix:– Product assortment should differentiate the

retailer while matching target shoppers’ expectations.

– Services mix can help differentiate one retailer from another (e.g., Home Depot’s “how-to” classes for do-it-yourselfers).

– Store atmosphere is important as a unique store experience can move customers to buy.

• Experiential retailing is growing in popularity.


Marketing in ActionMarketing in ActionOutdoor-products retailer Cabela’s provides more than deep product assortment and good customer service. The Fort Worth Texas store offers an African animal diorama, trophy deer museum, three walk-through aquariums, and conservation mountain, which boasts museum quality taxidermy displays.

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The Cabella’s “experience” has made it a tourist destination.



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Successful retailers orchestrate every aspect of the store atmosphere and experience.

Sony Style carefully controls the music, lighting, colors, and even the smells (vanilla and mandarin orange).



Price decisions:– The price policy must

fit with the target market and positioning, the product and service assortment, and the competition.

• Price promotions vs. EDLP.

• “High-low” pricing.



Everyday low prices (EDLP) involves charging a constant, everyday low price with few sales or discounts.

Price decisions:


Retailer Marketing DecisionsRetailer Marketing Decisions Price decisions:

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 images, or attract customers who will buy other goods at full price.



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Bijan’s boutique on Rodeo Drive in Beverly Hills sells $375 silk ties and $19,000 ostrich-skin vests. Its “appointment only” policy makes wealthy, high-comfortable clients comfortable with these prices.


Retailer Marketing DecisionsRetailer Marketing Decisions Promotion decisions:

– Retailers can use any or all of the promotion tools—advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers.


Retailer Marketing DecisionsRetailer Marketing Decisions Place (distribution) decisions:

– Location is the key to success.• Accessibility• Consistent with positioning

– Retailers can locate in: • Central business districts.• Regional shopping centers.• Community shopping centers.• Strip malls (neighborhood shopping center).• Power centers.• Lifestyle centers.


Place Decisions Place Decisions Central business districts are

located in cities and include department and specialty stores, banks, and movie theaters.


Place DecisionsPlace DecisionsA shopping center is a group of retail businesses built on a site that is planned, developed, owned, and managed as a unit

“Location, location, location”



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Today’s shopping centers are more about creating places to be rather than just places to buy. The trend is towards large power centers, smaller lifestyle centers, or hybrids of each. Visit The Wharf’s website to see an example.

http://www.thewharfal.com/?section=experience


Retail Trends & DevelopmentsRetail Trends & Developments1. New retail forms

and shortening retail life cycles.

2. Slowed economy and tightened consumer spending.

3. Growth of non-store retailing.

4. Retail convergence.

5. Rise of the megaretailers.

6. Growing importance of retail technology.

7. Global expansion of major retailers.

8. Retail stores as “communities” or “hangouts”.


Retailing Trends and DevelopmentsRetailing Trends and DevelopmentsTrend #1: New Retail Forms and Shortening

Retail Life Cycles

The wheel-of-retailing concept states that many 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 evolving to become the retailers they replaced.


Retailing Trends and DevelopmentsRetailing Trends and Developments

Trend #2: A slowed economy and tighter consumer spending



Growth of non-store retailing includes:

- Mail order- Television- Phone- Online


Retailing Trends and DevelopmentsRetailing Trends and DevelopmentsTrend #4: Retail Convergence

Retail convergence involves the merging of consumers, producers, prices, and retailers- creates greater competition for retailers and greater difficulty differentiating offerings.


Retailing Trends and DevelopmentsRetailing Trends and DevelopmentsTrend #5: The Rise of Megaretailers

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



Trend #6: Growing importance of retail technology

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.



Trend #7: Global expansion of major retailers

Retailers are expanding to escape mature and saturated home markets



Trend #8: Retail stores as communities or “hangouts”



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The Internet has spawned a whole new breed of shoppers – 92% of shoppers have more confidence in information they find online. As a result, many retailers offer users the chance to review or rate products.

http://www.cabelas.com/cabelas/en/templates/product/standard-item.jsp?_DARGS=/cabelas/en/common/catalog/item-link.jsp_A&_DAV=MainCatcat20656-cat20682_TGP&id=0038284621089a&navCount=2&podId=0038284&parentId=cat20682&masterpathid=&navAction=push&catalogCode=

http://www.cabelas.com/cabelas/en/templates/product/standard-item.jsp?_DARGS=/cabelas/en/common/catalog/item-link.jsp_A&_DAV=MainCatcat20656-cat20682_TGP&id=0038284621089a&navCount=2&podId=0038284&parentId=cat20682&masterpathid=&navAction=push&catalogCode=



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Bloom supermarkets allow customers to use handheld scanners to track their bill as they shop, then download the scanner data at the self-service pay station.



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Many retailers are now building virtual communities online. Scissors and crafting supplies maker Fiskars’ online community has more than 4,000 members!

http://www.fiskateers.com/


Fuel for ThoughtFuel for Thought

Many retail stores are becoming “communities” or “hangouts” either in the brick-and-mortar or virtual worlds.

What can retailers do to make their brick-and-mortar stores “community friendly”?

Are there circumstances in which it would be undesirable to encourage patrons to “hang-out”? Explain.


WholesalingWholesaling

All activities involved in selling All activities involved in selling goods and services to those goods and services to those buying for resale or business buying for resale or business use.use.

Wholesalers add value for producers by performing one or more channel functions.



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Many of the nation’s largest and most important wholesalers – like Grainger – are largely unknown to final consumers. Grainger offers more than 900,000 maintenance, repair, and operating (MRO) items to over 1.8 million customers. Grainger’s value proposition is simple: to make it easier and less costly for buyers to purchase MRO items.


Importance of WholesalersImportance of WholesalersFunctions performed by wholesalers:


WholesalingWholesaling 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.


WholesalingWholesaling 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.

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


WholesalingWholesaling Financing involves the wholesaler

providing credit and financing suppliers by ordering earlier and paying on time.

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


WholesalingWholesaling Market information involves the

wholesaler providing information to suppliers and customers about competitors, new products, and price developments.

Management services and advice involves wholesalers helping retailers train their sales clerks, improve store layouts, and set up accounting and inventory control systems.


Types of WholesalersTypes of Wholesalers Merchant Wholesaler: an independently

owned wholesaler business that takes title to the merchandise it handles.– Largest group of wholesalers.– Account for 50% of wholesaling.– Two broad categories:

• Full-service wholesalers– who provide a full set of services

• Limited-service wholesalers– who provided few services and specialized

functions.


Types of WholesalersTypes of Wholesalers Brokers and agents:

– Do not take title to goods.– Perform only a few functions.– Specialize by product line or customer type.

Brokers bring buyers and sellers together and assist in negotiations

Agents represent buyers on a more permanent basis.– Manufacturers’ agents are the most common

type of agent wholesaler.


Types of WholesalersTypes of Wholesalers

Manufacturers’ sales branches and offices:– Involves wholesaling by sellers or buyers

themselves rather than through independent wholesalers.


Figure 11.2:Figure 11.2:

Wholesaler Marketing Wholesaler Marketing Decisions/StrategiesDecisions/Strategies


Wholesaler Marketing DecisionsWholesaler Marketing Decisions

Wholesaler strategy:– Segmentation, targeting, differentiation,

and positioning. Wholesaler marketing mix:

– Product assortment and services.– Price.– Promotion.– Distribution (location).


Trends in WholesalingTrends in Wholesaling Need for ever greater efficiency. Demands for lower prices. Weeding out of suppliers who are not

adding value based on cost and quality. Distinction between large retailers and

wholesalers continues to blur. Wholesalers will continue to increase the

services provided to retailers. Wholesalers are now going global –

perhaps due to slower growth in domestic markets



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Pharmaceutical wholesaler McKesson helps its retail pharmacist customers to be more efficient by offering a wide range of online resources.


1. Explain the roles of retailers in the distribution channel and describe the major types of retailers.

2. Describe the major retailer marketing decisions.

3. Discuss the major trends and developments in retailing.

4. Describe the major types of wholesalers and their marketing decisions.

Reviewing the ConceptsReviewing the Concepts

Retailing and Wholesaling Chapter 11. Copyright 2011, Pearson Education Inc., Publishing as...

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