Retailing (Concept & Definition)

Retailing and Retailing and WholesalingWholesaling

Chapter 14Chapter 14

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Objectives

• Understand the roles of retailers and Understand the roles of retailers and wholesalers in the marketing wholesalers in the marketing channel.channel.

• Know the major types of retailers.Know the major types of retailers.

• Know the major types of wholesalers.Know the major types of wholesalers.

• Understand the marketing decisions Understand the marketing decisions facing retailers and wholesalers.facing retailers and wholesalers.

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• Huge product Huge product assortment assortment

• Prices are 20% – Prices are 20% – 30% below 30% below hardware storeshardware stores

• Obsessed with Obsessed with offering high offering high quality customer quality customer serviceservice

• Lifetime value of Lifetime value of customers: customers: $25,000$25,000

• Well-trained, highly Well-trained, highly motivated salespeople motivated salespeople earn above average earn above average salariessalaries

• Customer problem Customer problem solving is encouragedsolving is encouraged

• Internet site offers Internet site offers many home many home improvement tipsimprovement tips

• One of today’s most One of today’s most successful retailerssuccessful retailers

Home DepotHome Depot

Case Study

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Definitions

• RetailingRetailing All activities involved in selling All activities involved in selling

goods or services directly to final goods or services directly to final consumers for their personal, consumers for their personal, nonbusiness use.nonbusiness use.

• RetailerRetailer Business whose sales come Business whose sales come

primarilyprimarily from retailing. from retailing.

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Types of RetailersTypes of Retailers

Retailing

• Specialty StoresSpecialty Stores

• Department Department StoresStores

• SupermarketsSupermarkets

• Discount StoresDiscount Stores

• Convenience Convenience StoresStores

• Off-Price Off-Price RetailersRetailers

• SuperstoresSuperstores

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Retailing

• Amount of serviceAmount of service

• Product linesProduct lines

• Relative pricesRelative prices

• Organizational Organizational approachapproach

• Self-service retailersSelf-service retailers Customers are willing to Customers are willing to

self-serve to save moneyself-serve to save money Discount storesDiscount stores

• Limited-service retailersLimited-service retailers Most department storesMost department stores

• Full-service retailersFull-service retailers Salespeople assist Salespeople assist

customers in every aspect customers in every aspect of shopping experienceof shopping experience

High-end department storesHigh-end department stores Specialty storesSpecialty stores

Retailers Are Retailers Are Classified By: Classified By:

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Retailing





• Specialty storesSpecialty stores Narrow product lines with Narrow product lines with

deep assortmentsdeep assortments

• Department storesDepartment stores Wide variety of product Wide variety of product

lineslines

• SupermarketsSupermarkets• Convenience storesConvenience stores

Limited lineLimited line

• SuperstoresSuperstores Food, nonfood, and Food, nonfood, and

servicesservices

• Category killersCategory killers Giant specialty storesGiant specialty stores


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Retailing





• Discount storesDiscount stores Low margins are offset Low margins are offset

by high volumeby high volume

• Off-price retailersOff-price retailers Independent off-price Independent off-price

retailersretailers TJ Maxx, Marshall’sTJ Maxx, Marshall’s

Factory outletsFactory outlets Levi Strauss, ReebokLevi Strauss, Reebok

Warehouse clubsWarehouse clubs Sam’s Club, CostcoSam’s Club, Costco


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Retailing





• Corporate chain storesCorporate chain stores Commonly owned / controlledCommonly owned / controlled

• Voluntary chainsVoluntary chains Wholesaler-sponsored groups Wholesaler-sponsored groups

of independent retailersof independent retailers

• Retailer cooperativesRetailer cooperatives Groups of independent Groups of independent

retailers who buy in bulkretailers who buy in bulk

• Franchise organizationsFranchise organizations Based on something uniqueBased on something unique

• Merchandising conglomeratesMerchandising conglomerates Diversified retailing lines and Diversified retailing lines and

forms under central forms under central ownershipownership


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• Retailer Marketing DecisionsRetailer Marketing Decisions Target marketing and positioningTarget marketing and positioning Product assortment, service mix, Product assortment, service mix,

store’s atmospherestore’s atmosphere PricePrice PromotionPromotion Place (location)Place (location)

Retailing

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• The Future of RetailingThe Future of Retailing New retail forms and shortening New retail forms and shortening

retail life cyclesretail life cycles Wheel-of-retailing conceptWheel-of-retailing concept

Growth of nonstore retailingGrowth of nonstore retailing Mail-order, television, phone, Mail-order, television, phone,

online shoppingonline shopping Retail convergenceRetail convergence

Retailing

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• The Future of RetailingThe Future of Retailing Rise of megaretailersRise of megaretailers Growing importance of retail Growing importance of retail

technologytechnology Global expansion of major Global expansion of major

retailersretailers Retail stores as “Communities” Retail stores as “Communities”

or “Hangouts”or “Hangouts”

Retailing

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Definitions

• 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.

• WholesalerWholesaler A firm engaged primarily in A firm engaged primarily in

wholesaling activity.wholesaling activity.

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• Wholesalers add value by Wholesalers add value by performing the following performing the following functions:functions: Selling and promotingSelling and promoting Buying and assortment buildingBuying and assortment building Bulk-breakingBulk-breaking WarehousingWarehousing TransportationTransportation

Wholesaling

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• Wholesalers add value by Wholesalers add value by performing the following performing the following functions:functions: FinancingFinancing Risk bearingRisk bearing Marketing informationMarketing information Management services and adviceManagement services and advice

Wholesaling

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Wholesaling

• Merchant Merchant WholesalersWholesalers

• Brokers and Agents Brokers and Agents

• Manufacturers’ and Manufacturers’ and retailers’ branches retailers’ branches and officesand offices

• Full-service wholesalersFull-service wholesalers Wholesale merchantsWholesale merchants Industrial distributorsIndustrial distributors

• Limited-service Limited-service wholesalerswholesalers Cash-and-carry wholesalersCash-and-carry wholesalers Truck wholesalers (jobbers)Truck wholesalers (jobbers) Drop shippersDrop shippers Rack jobbersRack jobbers Producer’s cooperativesProducer’s cooperatives Mail-order wholesalersMail-order wholesalers

Types of Types of WholesalersWholesalers

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Wholesaling


• Brokers and Agents Brokers and Agents


• BrokersBrokers Bring buyers and Bring buyers and

sellers together and sellers together and assist in negotiationassist in negotiation

• AgentsAgents Manufacturers’ agentsManufacturers’ agents Selling agentsSelling agents Purchasing agentsPurchasing agents Commission merchantsCommission merchants


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Wholesaling


• Brokers and AgentsBrokers and Agents


• Sales branches and Sales branches and officesoffices Branches carry inventory: Branches carry inventory:

lumber, auto equipment, lumber, auto equipment, partsparts

Offices do not carry Offices do not carry inventory: dry goodsinventory: dry goods

• Purchasing officersPurchasing officers Perform roles similar to Perform roles similar to

brokers and agents, brokers and agents, however these individuals however these individuals are employees of the are employees of the organizationorganization


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• Wholesaler Marketing DecisionsWholesaler Marketing Decisions Target market and positioningTarget market and positioning

Targeting may be made on the basis of size Targeting may be made on the basis of size of customer, type of retailer, need for service.of customer, type of retailer, need for service.

Marketing mix decisionsMarketing mix decisionsProduct and service assortment: inventory, Product and service assortment: inventory,

linelinePricing: usual markup on COG is 20%Pricing: usual markup on COG is 20%Promotion: largely disorganized and Promotion: largely disorganized and

unplannedunplannedPlace: location, facilitiesPlace: location, facilities

Wholesaling

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• Trends in WholesalingTrends in Wholesaling Price competition is still intensePrice competition is still intense Successful wholesalers must add value Successful wholesalers must add value

by increasing efficiency and by increasing efficiency and effectivenesseffectiveness

The distinction between large retailers The distinction between large retailers and wholesalers continues to blurand wholesalers continues to blur

More services will be provided to More services will be provided to retailersretailers

Many wholesalers are going globalMany wholesalers are going global

Wholesaling