Chapter 11 Retailing and Wholesaling Retailing and Wholesaling

Chapter 11

Retailing Retailing and Wholesaling and Wholesaling

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

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.

Rest Stop:Rest Stop: Previewing the ConceptsPreviewing the Concepts


Costco Background

• Performance: Costco warehouse club outsells Wal-Mart’s Sam’s Club by 60% despite having 222 fewer stores. Sales have surged 66%, profits 45%, over the last 4 years.

• Product Offerings: Costco offers a limited selection of national and private-label brands at very low prices to members. Costs are kept low; no item is marked-up more than 14%. Operating margins average only 2.8%.

Costco Beats Wal-Mart at its Own GameFirst Stop

Why Costco Succeeds• Value Proposition: Costco

carries an ever-changing assortment of high quality goods and luxury “treasure items” that Sam’s Club does not. These one-time offerings create a sense of shopping urgency among buyers.

• Enhanced Image: Costco has made discount shopping fashionable and draws higher income buyers. The Kirkland Signature store brand provides a quality offering for a wide range of goods.


Retailing

• Retailing:All activities involved in selling goods or

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

• Most retailing is done by retailers, but nonstore retailing has recently grown by leaps and bounds.Nonstore retailing includes sales made via the

internet, direct mail, catalogs, telephone, and other direct sales methods.


Types of Retailers

• The different types of retailers can be classified based on:The amount of service they offer.The breadth and depth of product lines.The relative prices charged.How they are organized.


Types of Retailers

• Classification by the 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 as they carry more

shopping goods about which details are needed.Full-service retailers:

• Usually carry more specialty goods for which customers need or want assistance or advice.


Types of Retailers

• Classification by length and breadth of their product assortments:Specialty stores:

• Feature narrow product lines, with deep assortments (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 Retailers

• Classification by length and breadth 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 assortment of routinely purchased food goods, nonfood items, and services (e.g., Wal-Mart Supercenter, Best Buy).

• Category killers are really giant specialty stores.


Types of Retailers

• Relative prices classification: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.


Types of Retailers

• Major types of retail organizations include:Corporate chain stores:

• Two or more outlets that are commonly owned and controlled.

Voluntary chain:• Wholesaler-sponsored group of

independent retailers engaged in group buying and merchandising.


Types of Retailers

• Major types of retail organizations include:Retailer cooperative:

• Group of independent retailers who set up a central buying organization and conduct joint promotion efforts.

Franchise organization:• Contractual association between a

franchisor and franchisees.


Retailer Marketing Decisions

• Major marketing decisions:Segmentation and targeting.Store differentiation and positioning.Retail marketing mix.

• Marketing decisions should create value for targeted retail customers.



• Retail strategy:Segmentation and targeting.Store differentiation and positioning.

• Retailers cannot make meaningful decisions related to the retail marketing mix until they first define and profile their target market and then decide how they will differentiate and position themselves in these markets.



• Retailer marketing mix:Product and service assortmentRetail pricesPromotionDistribution (location)



• 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.



• 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



• 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.



• Place (distribution) decisions:Location is the key to success.Retailers can locate in:

• Central business districts.• Regional shopping centers.• Community shopping centers.• Strip malls (neighborhood shopping center).• Power centers.• Lifestyle centers.


Retail Trends & Developments

1. New retail forms and shortening retail life cycles.

2. Slowed economy and tightened consumer spending.

3. Growth of nonstore 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.”


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.


Wholesaling

• Financing

• Risk bearing

• Market information

• Management services and advice

• Selling and promoting

• Buying and assortment building

• Bulk-breaking

• Warehousing

• Transportation

Functions performed by wholesalers:


Types 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.

• Limited-service 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.

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

type of agent wholesaler.



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

buyers themselves rather than through independent wholesalers.


Wholesaler Marketing Decisions

• Wholesaler strategy:Segmentation, targeting, differentiation,

and positioning.

• Wholesaler marketing mix:Product assortment and services.Price.Promotion.Distribution (location).


Trends in Wholesaling

• Need for ever greater efficiency.

• Demands for lower prices.

• Winnowing 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.


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.

Rest Stop: Reviewing the Concepts

Documents

Chapter 11 Retailing and Wholesaling Retailing and Wholesaling