Chapter 14: Retailing, Direct Marketing, and Wholesalingstephanielarkin.com/marketing/Ch14.pdf · Chapter 14: Retailing, Direct Marketing, and Wholesaling Pride/Ferrell Foundations

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Chapter 14:Retailing, Direct Marketing, and Wholesaling

Pride/FerrellFoundations of MarketingFourth Edition

Prepared by Milton PressleyUniversity of New Orleans


Objectives1. Understand the purpose and function of retailers in

the marketing channel.2. Identify the major types of retailers.3. Explore strategic issues in retailing.4. Recognize the various forms of direct marketing

and selling.5. Examine franchising and its benefits and

weaknesses.6. Understand the nature and functions of wholesalers.7. Understand how wholesalers are classified.


Retailing• All transactions in which

the buyer intends to consume the product through personal, family or household use

- Retailer: An organization that purchases products for the purpose of reselling them to ultimate consumers


Types of Retailers: General

General merchandise retailer – offers a variety of product lines that are stocked in considerable depth


Department Store• Large retail

organizations characterized by wide product mixes and organized into separate departments to facilitate marketing and internal management

Department Store

Because of its size, wide product mix, and services

provided, Macy’s is classified as a department store.


Other Types of Retailers• Discount store – Self-service, general merchandise,

brand name products at low prices• Convenience store – Open long hours offering a

narrow assortment of convenience items• Supermarket – A complete line of food products

with some nonfood items• Superstore – Giant retail outlets carrying food and

nonfood products• Hypermarket – Supermarket and discount store

combined into one location


Discussion Question• Click on the Television below and watch the

commercial. Then discuss which type of retail store the ad represents.

http://www.youtube.com/watch?v=wjEjEWRcT14













Warehouse Clubs• Large scale members-

only establishments that combine features of cash-and-carry wholesaling with discount– Warehouse showrooms – Large

on-premise inventories with minimal services (IKEA)

Warehouse Club

Sam’s Club is a warehouse club that markets many product lines. Most of Sam’s Club product lines have limited

depth.


Specialty Retailers

Off-PriceRetailers

CategoryKillers

TraditionalSpecialtyRetailers

SpecialtyRetailers


Traditional Specialty Stores

• Stores that carry a narrow product mix with deep product lines

Traditional Specialty Store

Traditional specialty stores, like Ann Taylor, have narrow but

deep product mixes.


Category Killers• A very large specialty

store concentrating on a major product category and competing on the basis of low prices and product availability

Category Killer

Category killers have enormous product mixes and low prices.


Off-Price Retailers• Stores that purchase manufacturers’

seconds, overruns, and off-season merchandise at below-wholesale prices– Resale to consumers at deep discounts– Examples: T.J. Maxx, Marshalls, and

Burlington Coat Factory


The Wheel of Retailing• A hypothesis on the evolution and development of

new types of retail stores• New retailers enter a market with low prices,

margins, and status.– Low prices are from cost-cutting and attract

imitators• Retailers eventually become more elaborate and

expensive over time– Many discount stores (like Kohl’s) offer more

services and look like department stores


The Wheel of Retailing

Department stores

Category killers

Warehouse clubs

Factory outlet malls

Discount stores

Department stores

Discount stores

Department stores

General stores, misc. small retailers

Late 20th c.

Early 20th c. Early 21st c.

Low prices and markups, few services, austere surroundings

High prices and markups, many services, expensive surroundings

Online retailers


Strategic Issues: • Various factors when evaluating potential

locations - Location of the firm’s target market within the trading

area - Kinds of products being sold - Availability of public transportation - Customer characteristics - Competitors’ locations• Types of locations - Freestanding structures - Business districts - Planned shopping centers


Types of Planned Shopping Centers

• Neighborhood shopping centers - Several small convenience and specialty stores• Community shopping centers - One or two department stores and some specialty stores• Regional shopping centers - Largest department store, widest product mixes and the

deepest product lines of all shopping centersSuperregional shopping center – Wide, deep mix attracts customers

from many miles awayLifestyle shopping center – Upscale specialty shops and entertainmentPower shopping center – Off-price stores with category killers


Discussion Question• Click on the Television below and watch the

commercial for Mall and Water Park of America. Then discuss which type of shopping center you think the Mall of America most resembles.

http://www.youtube.com/watch?v=VClAYTX9Wm0












Other Strategic Issues– Retail positioning –

• Identifying an un-served or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment

– Store image – • A functional and psychological picture in consumers’

mind– Atmospherics –

• The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying

– Category management – • Managing similar, often substitutable products

produced by different manufacturers


Direct Marketing• The use of telecommunications and nonpersonal

media to introduce products to consumers, who then can purchase them via mail, telephone or the Internet

- Catalog marketing – Customers select from catalogs - Direct response marketing – Customers respond to ads

with mail or telephone orders- Telemarketing – Products sold by phone- Television home shopping – Customers order products

seen on TV by telephone- Online retailing – Customers shop and buy online


Online Retailing• Retailing that makes

products available to buyers through online connections

Online Retailing

Travelocity is an online retailer that offers a broad assortment

of travel services.


Direct Selling• The marketing of products to ultimate

consumers through face-to-face sales presentations at home or in the workplace


• Visit the Web Site by clicking on the @ symbol below. After exploring the Site, discuss what type of direct marketing Cabela’s is engaged in.

Discussion Question

@

http://www.cabelas.com/

http://www.cabelas.com/


Franchising• An arrangement in which a supplier

(franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration


Top U.S. Franchisers and Their Startup Costs


Wholesaling• Transactions in which products are bought for

resale, for making other products or for general business operations

- Services Provided by Wholesalers: Initiating sales contactsProviding financial assistanceServing as conduits for information within the marketing channelAssisting with marketing strategyHelping retailers to select inventoryOffering specialized knowledge of market conditionsOffering expert negotiation on final purchases


Types of Wholesalers• Merchant wholesalers - Independently owned

businesses that take title to goods, assume ownership risks and buy and sell products to other wholesalers, business customers or retailers


Types of Wholesalers • Full-service wholesalers - Merchant

wholesalers that perform the widest range of wholesaling functions

- General merchandise wholesalers – Carry many lines with limited depth in each line

- General-line wholesalers – Carry many products from a few lines

- Specialty-line wholesalers – Carry perhaps a single line with few products

- Rack jobbers – Own and maintain display racks in stores


Services That Limited Wholesalers Provide

• Cash-and-carry wholesalers –Customers pay cash and provide transportation• Truck wholesalers (truck jobbers) – Transport products direct to customers• Drop shippers (desk jobbers) – Take title but not possession• Mail-order wholesaling – Sell products through catalogs


Agents and Brokers• Agents- Intermediaries who represent either buyers or sellers on a permanent basis

• Brokers - Intermediaries who bring buyers and sellers together temporarily


Services That Agents and


Agents and Brokers (cont’d)• Manufacturers’ agents - Independent intermediaries that represent two or more sellers

and offer complete product lines• Selling agents - Intermediaries that market a whole product line or a

manufacturer’s entire output• Commission merchants - Agents that receive goods on consignment and negotiate

sales in large, central markets


Manufacturers’ Sales Branches • Sales branch - Manufacturer owned intermediaries that sell

products and provide support services to the manufacturer’s sales force

• Sales offices - Manufacturer owned operations that provide

services normally associated with agents


After Reviewing This Chapter You Should:

1. Understand the purpose and function of retailers in the marketing channel.

2. Know the major types of retailers.3. Understand strategic issues in retailing.4. Be able to recognize the various forms of

direct marketing and selling.5. Understand franchising and its benefits and

weaknesses.6. Understand the nature and functions of

wholesalers.7. Know how wholesalers are classified.


Key Concepts• Retailing• Retailer• General-merchandise retailer• Department stores• Discount stores• Convenience store• Supermarkets• Superstores• Hypermarkets• Warehouse clubs• Warehouse showrooms• Traditional specialty retailers• Category killer• Off-price retailers• Neighborhood shopping centers• Community shopping centers

• Superregional shopping centers• Lifestyle shopping centers• Power shopping centers• Retail positioning • Atmospherics• Category management• Direct marketing• Catalog marketing• Direct response marketing• Telemarketing• Television home shopping• Online retailing• Direct selling• Franchising• Wholesaling• Wholesaler• Merchant wholesalers• Full-service wholesalers• General merchandise wholesalers

Documents

Chapter 14: Retailing, Direct Marketing, and Wholesalingstephanielarkin.com/marketing/Ch14.pdf · Chapter 14: Retailing, Direct Marketing, and Wholesaling Pride/Ferrell Foundations