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8/8/2019 Ch.16 Retailing, Wholesaling and Logistics
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Chapter 16 Managing Retailing,Wholesaling and Logistics
Prepared By:
Sujay Soni Roll no. 25R. K. Singh Roll no. 32
18-1
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KOTLER ONMARKETING
Successful marketing
strategies requiresintegrating retailers,
wholesalers, and
logistical
organizations.
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WHAT IS RETAILING????
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WHAT IS RETAILING
Retailing covers all the activities involved in thesale of goods and/or services to final consumers.
Any organization selling to final consumers
whether it is a manufacturer, wholesaler or
retailers is called retailer
It is defined on the basis on purpose of use andnot on the quantity.
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FACTORS AFFECTING THE CHOICE OF
RETAILER
1. Convenience of buying
2. Variety of selection
3. Quality of products freshness, purity, craftsmanship
4. Courtesy of salespersons
5. Integrity reputation for fairness in dealings
6. Services offered delivery, credit , returned goods privileges
7. Value offered for money.
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LEVEL OF SERVICE IN RETAILING
Four levels of service:
1. Self-service- Customers have to carry out their own locate compare select process.
Main motto is to save on operating costs. E.g. Ginger hotels, Fire cracker stores.
2. Self-selection - Customers find their own goods, although they can ask for assistance. E.g
Big Bazaar
3. Limited service Retailer gives some additional services like credit and good returns
privileges. Customer expect more information and assistance.
4. Full service Sales person are ready to assist in every phase of locate compare
select process. High staffing cost is the disadvantage.
E.g Small electronic shops, cosmetics shops.
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TYPES OF RETAIL STORES
Convenience Stores is a convenient place to shop , eithercentrally located downtown or in the neighborhood. Easy parking,
Fast check out and easy to find products add to the convenience.
Such stores meets the requirement of nearby people. E.g. nearby
Grocery stores
Shopping Stores attract customers from greater distances
because of the width and depth of their assortments. Such stores
are having displays, demonstration, information and
knowledgeable sales clerk. E.g V Mart, Westside etc.
Specialty Stores are those form which customers have developed
a strong attraction. Due to the reasons like level of service,
selection or reputation, customers will constantly buy at these
stores. E.g Pantaloon, Raymonds etc.
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HOW CONSUMER VIEW STORE PRODUCT
COMBINATION
Product Class Store type
Convenience Shopping Specialty
Convenience Will buy any brand
at most accessible
store
Shop around to find
better service
and/or lower prices
Prefer store. Brand
may be important
Shopping
Want some
selection but will
settle for
assortment at most
accessible store
Want to compare
both products and
stores mixes
Prefer store but
insist on adequate
assortment
Specialty
Prefer particular
product but like
place convenience
too
Prefer particular
product but still
seeking best total
product and mix
Prefer both store
and product
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MARKETING TIP FOR RETAILING
The image of the retail stores in the mind
of customers is more important than the
products it cater.
Retailers strategy planning must consider
potential customers attitude towards both
the product and stores.
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ESSENTIAL ELEMENTS FOR A SUCCESSFUL RETAIL
TRADE
In order to get success in retailing, the retailer must consider the followingfacts:
1. Selection of Proper Goods: The first essential condition or the success of aretailers business is that he should be able to select proper goods whichcan meet the requirement of his customers. For proper selection he shouldexercise his foresight, use his past experience and keep in view thechanging fashions.
2. Perfect Knowledge about Goods: A retailer should have through knowledgeabout the goods he deals in only then he will be able to satisfy hiscustomers and answer their questions.
3. Sales Policy: He should adopt the policy of buying in bulk and increase hissales by satisfying himself with a lower margin of profit instead of charginghigher prices and limiting his sales. By this policy he can also face any localcompetition from other retailers in the market.
4. Adequate Capital: Adequate capital is vital for the success of any business.A retailer should command adequate capital at his disposal because he hasto allow some credit facilities also to his customers.
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ESSENTIAL ELEMENTS FOR A SUCCESSFUL RETAIL
TRADE
5. Selection of suitable Business Location: It is very necessary that a
suitable business location should be selected. The place should be
easily accessible to the customers. What should be a suitable
location will depend on the nature of goods he deals in.
6. Necessary Business Education: He should be well versed with the art
of a salesmanship underlined the habits and temperament of his
customers.
7. Attractive Display and Advertisement: He should arrange things in an
attractive style as to attract more customers. Goods should be
prominently displayed. He should also advertise.
8. To provide Credit Facility: In modern times providing credit facilities
has also become necessary. For this, the retailer should know thatfinancial position of his customers and their habits also.
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THE WHEEL OF RETAILING CONCEPT.
The Wheel of Retailing concept states that new types
of retailers usually begin as low-margin, low-price, low-status operations, but later evolve into higher-priced,
higher-service operations, eventually becoming like the
conventional retailers they replaced.
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TYPES OF RETAILING DISTRIBUTION
1. Specialty Shop2. Departmental Shops
3. Supermarkets
4. Catalogue showroom retailers5. Discount houses
6. Convenience stores
7. Automatic vending8. Telephone and mail ordering
9. Door to door Selling
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SPECIALTY SHOP
A limited line store with distinct personality.
Caters to certain type of customers whom the
management or sales person knows well
Familiarity simplifies buying, speed turnover, cuts the cost
of obsolescence & style changes of customers.
Deals in high quality sports good, exclusive clothing orleather goods.
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DEPARTMENTAL STORES
Organized into many separate departments
Each department is like separate limited line specialty
stores
Vide variety of products
Provides additional services like credit, goods return and
home delivery.
Some market segments can be reached throughdepartmental stores only
E.g 7 seas mall, Wall mart, More
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SUPERMARKETS
Multi products lines
Price discounts is the cornerstone
Self service
Profit comes from high volume sales and not from high
traditional mark ups
Higher level of convenience.
E.g Subhiksha, Big Bazaar, Reliance fresh
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CATALOGUE SHOWROOM RETAILERS
Sells the products out of catalogues & displays
Tend to focus on well known manufacturers brand.
E.g. Jewelers showroom, Boutiques, cars showrooms.
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DISCOUNT HOUSES
Offers hard goods like cameras, TV appliances atsubstantial price cuts.
Mainly developed to clear the old lots of manufacturers of
non moving items.
E.g Annual sale of various garment manufacturers.
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CONVENIENCE STORES
Limited assortment (Product Lines)
Prices are higher than supermarkets
Pick up and fill in items like bread, milk, ice cream,beer etc.
E.g 6 to Ten shops
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AUTOMATIC VENDING
Vending machines are used
Higher initial cost and considerable operating
costs.
Provides easy access to products
Mainly used in public places
E.g Amul, Pepsi, Espresso Coffee. ATMs
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TELEPHONE & MAIL ORDERING
SYSTEM
Shopping from any place of convenience, home,office, gardens etc.
Mainly used for specialized goods
Retail stores dont want to carry the items havingvery few customers
Flourishing in Rural areas where shopping
options are less
E.gTele shopping, Asian sky shop.
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DOOR TO DOOR SELLING
Old but effective method
Cover less than 1% of total retailing
Meets the needs of Convenience and personal attention
Useful to force new products in markets
Expensive method of selling
Difficulty in contacting is more.
E.g. Ureka Forbes.
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RETAILING MARKETING DECISIONS
Target Market
Product Assortment and Procurement
Breadth
Depth
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Product-differentiation Strategy Possibilities
Feature exclusive national brands that are not
available at competing retailers
Feature mostly private branded merchandise
Feature blockbuster distinctive merchandise events
Feature surprise or ever-changing merchandise
Feature the latest or newest merchandise first
RETAILING MARKETING DECISIONS
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Services and Store Atmosphere Pre purchase services include accepting telephone
and mail orders, etc.
Post purchase services include shipping
and delivery, etc. Ancillary services include general information,
check cashing, parking, etc.
Arrangement, lightings, Labelling
Price Decision High-markup, lower volume Low-markup, high volume
RETAILING MARKETING DECISIONS
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Promotion Decision
Place Decision
General business districts (Downtown)
Regional shopping centers
Community centers
A location within a larger store
RETAILING MARKETING DECISIONS
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CORPORATE RETAILING
Benefits available to corporate housescoming in the retail business are
Economies of Scale
Huge investment
Brand name
Qualified Staff
Market details in depth
18-27
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MARKETING TIP
Always develop the retailing marketingstrategy keeping in mind the needs and
mind set of Indian Women.
78% of retailing business is done by
women and balance 22% of retailing is
influenced by women in one or other
aspect.
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WHAT ISWHOLESALING?
Wholesalers are primarily engaged in buying
merchandise for resale to retailers, industrial ,
commercial, institutional users, export, or acting
as agents in such transactions.
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WHOLESALERS FUNCTIONS
Selling and promoting: Wholesalers sales forces help manufacturers reachmany small customers at a low cost. The wholesaler has more contacts and
is often more trusted by the buyer than the distant manufacturer.
Buying and Assortment Building: Wholesalers can select items and build
assortments needed by their customers, thereby saving the consumers
much work.
Bulk Breaking: Wholesalers save their customers money by buying incarload lots and breaking bulk.
Warehousing: Wholesalers hold inventories, thereby the inventory costs and
risks of suppliers and customers.
Transportation: Wholesalers can provide quicker delivery to buyers because
they are closer than the producers. Wholesalers make transportation
arrangement from the premises of manufacturers to their godowns and
from their godowns to the retail stores. They often maintain their own fleet
of vehicles for this purpose.
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WHOLESALERS FUNCTIONS
Financing: Wholesalers finance their customers by giving credit,and they finance their suppliers by ordering early and paying billson time, They generally purchase goods in cash basis from themanufacturers and sometimes also given advance to themanufacturers. Thus, the manufacturers need not wait till theirproducts are sold. The wholesalers help the retailers by selling thegoods on credit.
Risk Bearing: Wholesalers absorb risk by taking title and bearingthe cost of theft, damage, spoilage, and obsolescence. These risksmay occur on account of change in prices and demand spoilage ofgoods and bad debts.
Market Information: Wholesalers give information to suppliers andcustomers about competitors, new products and pricedevelopment.
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SERVICES TO MANUFACTURERS
Concentration on production
Helpful in Large Scale Production
Distribution Facilities
Helpful in Demand Analysis and Forecasting
Financing
WarehousingFacilities
Advantage of Advertisement
Help in price determination
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SERVICES OFWHOLESALERS TO
RETAILERS
Purchasing facilities Low Inventory
Risk Taking
Financial Assistance
Information about new products
Benefits of Specialization
Stability in Prices
Transport Facility
Consultancy Services
18-33
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TYPES OFWHOLESALERS
Based on the criterion of taking title of goods, Wholesalers
can be divided into two types:
1. Merchant Wholesalers: own (take title to) the goods they sell.
It actually owns takes title to- for some period of time
before selling to its customers
2. Agent middlemen: are wholesalers who do not own the goods
they sell. Their main purpose is to help in buying and selling.
They usually provide even fewer functions than the limited
function wholesalers. In certain trades, however they are
extremely valuable. They may operate at relatively low cost
sometimes 2 to 6 percent of their selling price.
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TYPE OF MERCHANTWHOLESALERS
A. Service Merchant Wholesalers
The categories under this are:
1. General merchandise wholesalers- carry a wide variety of non perishable
items such as hardware, electrical supplies, plumbing supplies, furniture,
drugs, cosmetics and automobile equipment.
2. Single Line (or general line) Wholesalers- Carry a narrower line of
merchandise than general merchandise wholesalers. For example, they
might carry only groceries, or wearing apparel, or certain types of
industrial tools or supplies.
3. Specialty Wholesalers- carry a very narrow range of products. A
consumer goods specialty wholesaler might carry only health foods or
oriental foods
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TYPE OF MERCHANTWHOLESALERS
B. Limited Function wholesalers: Provides only some wholesaling
functions. E.g. some functions like Anticipate needs, carries stock,
Delivery goods, Grant credit, Provides information & advice.
Drop shippers- own the goods and they sell but do not actually handle,
stock or deliver them. They get orders from wholesalers, retailers or
industrial users and pass these orders on to producers. As drop
shippers do not have to handle goods their operating costs are lower.
Truck Wholesalers- specialize in delivering goods which they stock in
their own truck. Handling perishable products in general demand
tobacco, candy potato chips, and salad dressings, truck wholesalers
may provide almost the same functions as full service wholesalers.
Mail order wholesalers- sell out of catalogs which may be distributed
widely to smaller industrial customers or retailers. These wholesalers
operate in the hardware, jewelry, sporting goods, and general
merchandise lines.
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TYPES OF AGENT MIDDLEMAN
1. Manufacturers Agent sells similar products for several non competing
manufacturers for a commission on what is actually sold. Such agents work
almost as members of each companys sales force but they are really
independent middlemen. Manufacturers agents account for more than half of
all agent middlemen,
2. Brokers bring buyers and sellers together. Brokers usually have a temporary
relationship with the buyer and seller while a particular deal is negotiated.
Their product is information about what buyers need and what supplies are
available. They aid in buyer seller negotiation. If the transaction is completed,
they earn a commission from whichever party hired them.
3. Commission merchants handle goods shipped to them by seller, complete the
sale and send the money minus their commission to each seller. Commission
merchants are common in agricultural markets where farmers must ship tobig city central markets. They need someone to handle the goods there as well
as to sell them.
4. Selling agent take over the whole marketing job of manufacturers not just the
selling function. A selling agent may handle the entire output of one or more
producers even competing producers with almost complete control of pricing.
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Target Market
Product Assortment and Services
Price Decision
Promotion Decision
Place Decision
Wholesaler marking functions
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Market Logistics
It includes planning the infrastructure toIt includes planning the infrastructure to
meet demand,meet demand,
Implementing and consulting the physicalImplementing and consulting the physical
flow of materials to destination at profit.flow of materials to destination at profit.
Market Logistics = Physical distribution +Market Logistics = Physical distribution +
Material management + Material FlowMaterial management + Material FlowSystemSystem
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Market Logistics
Supply Chain Management (SCM):Supply Chain Management (SCM):--
SCMSCM startsstarts beforebefore physicalphysical distribution,distribution, itit meansmeansstrategicallystrategically procuringprocuring thethe rightright inputsinputs (raw(raw materials,materials,
componentscomponents andand capitalcapital equipments),equipments), convertingconverting themthem
efficientlyefficiently intointo finishedfinished productsproducts andand dispatchingdispatching themthem toto
finalfinal destinationsdestinations..
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Market Logistics
Market logistics planning has four steps:Market logistics planning has four steps:
Deciding on the companys valueDeciding on the companys value
proposition to its customersproposition to its customers
Deciding on the best channel design andDeciding on the best channel design and
network strategy for reaching the customersnetwork strategy for reaching the customers
Developing operational excellence in sales forecasting,Developing operational excellence in sales forecasting,warehouse management, transportation management, andwarehouse management, transportation management, and
materials managementmaterials management
Implementing the solution with the best information systems,Implementing the solution with the best information systems,
equipment, policies, and proceduresequipment, policies, and procedures
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Market Logistics
Integrated logistics systems (ILS)Integrated logistics systems (ILS)
ILS = Conventional LS + ITILS = Conventional LS + IT
e.g. Bar code system, Satellite tracking etc.e.g. Bar code system, Satellite tracking etc.
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Market Logistics
MarketMarket--logistics Objectiveslogistics Objectives
Getting right goods to the right places at theGetting right goods to the right places at the
right time for the least costright time for the least cost
> Customer service = 1/ Distribution cost> Customer service = 1/ Distribution cost
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Market Logistics
MarketMarket--logistics Decisionslogistics Decisions
1. Order Processing1. Order Processing
Order
Order--toto--payment cyclepayment cycle
2. Warehousing2. Warehousing
Storage warehousesStorage warehouses-- Near production unit,Near production unit,
long period of timelong period of time
Distribution warehousesDistribution warehouses-- near service point,near service point,for short period of timefor short period of time
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3. Inventory3. Inventory
Inventory cost increases at an accelerating rateInventory cost increases at an accelerating rateas the customer service level approaches 100%as the customer service level approaches 100%
Order (reorder) pointOrder (reorder) point
OrderOrder--processing costsprocessing costs
InventoryInventory--carrying costscarrying costs
Market Logistics
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Figure 18.2: Determining Optimal Order Quantity
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Market Logistics
JustJust--InIn--Time production (JIT)Time production (JIT)
4. Transportation4. Transportation
ModesModes railrail
RoadRoad
ShippingShipping
PipelinePipeline
TrainTrain--shipship
AirAir--trucktruck
ContainerizationContainerization-- putting the goods in boxes to easyputting the goods in boxes to easythe transportationthe transportation
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The 1The 1--800800--Flowers.com site makesFlowers.com site makes
online ordering easyonline ordering easy
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Market Logistics
Organizational LessonsOrganizational Lessons
Companies should appoint a senior vice presidentCompanies should appoint a senior vice president
of logistics to be the single point of contact for allof logistics to be the single point of contact for all
logistical elementslogistical elements
The senior vice president of logistics should holdThe senior vice president of logistics should hold
periodic meetings with sales and operationsperiodic meetings with sales and operations
people to review inventory, etc.people to review inventory, etc.
New software and systems are the key toNew software and systems are the key toachieving competitively superior logisticsachieving competitively superior logistics
performance in the futureperformance in the future
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