1. Retailing and Wholesaling Chapter 14

2. 14- 1 Objectives Understand the roles of retailers and wholesalers in the marketing channel. Know the major types of retailers. Know the major types of wholesalers. Understand the marketing decisions facing retailers and wholesalers.

3. 14- 2 Huge product assortment product Prices are 20%–30% below hardware stores Obsessed with offering high quality customer service Lifetime value of customers: $25,000 Well-trained, highly motivated salespeople earn above average salaries Customer problem- solving is encouraged Internet site offers many home improvement tips One of today’s most successful retailers c Home Depot Home Depot

4. 14- 3 Definitions Retailing  All activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.

5. 14- 4 Definitions Retailer  Business whose sales come primarily from retailing.  Can be brick and mortar, 100% virtual, or click and mortar

6. 14- 5 ZanyBrainy.com Video Clip ZanyBrainy.com is a click and mortar toy retailer.click BusinessNow Click the picture above to play video

7. 14- 6 How is web retailing different? In your opinion, what “works on the web” that won’t work in a typical store? Discussion Question

8. 14- 7 Retailers Types of Retailers Specialty Stores Specialty Stores Department Stores Department Stores Supermarkets Discount Stores Discount Stores Convenience Stores Convenience Stores Off-Price Retailers Off-Price Retailers Superstores

9. 14- 8 Retailing Self-service retailers  Customers are willing to self-serve to save money  Discount stores Limited-service retailers  Most department stores Full-service retailers  Salespeople assist customers in every way  High-end department stores  Specialty stores Amount of service Product lines Relative prices Organizational approach Retailers are Classified by:

10. 14- 9 Retailing Specialty stores  Narrow product lines with deep assortments Department stores  Wide variety of product lines Supermarkets Convenience stores  Limited line Superstores  Sell food, nonfood, and services Category killers  Giant specialty stores Amount of service Product lines Relative prices Organizational approach Retailers are Classified by:

11. 14- 10 Retailing Discount stores  Low margins are offset by high volume Off-price retailers  Independent off-price retailers  TJ Maxx, Marshall’s  Factory outlets  Levi Strauss, Reebok  Warehouse clubs  Sam’s Club, Costco Amount of service Product lines Relative prices Organizational approach Retailers are Classified by:

12. 14- 11 Outlet malls and category complete are popular with consumers

13. 14- 12 Retailing Corporate chain stores  Commonly owned/controlled Voluntary chains  Wholesaler-sponsored groups of independent retailers Retailer cooperatives  Groups of independent retailers who buy in bulk FranchiseFranchise organizations organizations Franchiseorganizations  Based on uniqueness Merchandising conglomerates  Diversified retailing lines under central ownership Diversified Amount of service Product lines Relative prices Organizational approach Retailers are Classified by:

14. 14- 13 Figure 14-1: Retailer Marketing Mix Decisions

15. 14- 14 The product assortment, the services mix, and the store atmosphere are used by retailers to differentiate their business from the competition. Select two retailers from your local area and discuss how each store differs with respect to the three variables above. Discussion Question

16. 14- 15 Retailer Marketing Mix  Price  High markup or high volume?  Promotion  Public relations, sales promotions, advertising, direct marketing advertising  Place  Location, location, location! Locationlocation Locationlocation Retailing

17. 14- 16 Atmosphere SmellMusic  Time Crowding  Negatively associated Touch  We don’t want to give it back  Once a customer tries it on, it becomes “theirs

18. 14- 17 The Right Hand “Sweet Spot” When you walk into a store, which direction do you normally go? Most people turn right  Drive on the right side of the street  Right handed Then proceed through the store counter- clockwise Stores often put best selling (and high profit) items in the right hand sweet spot Sales can go up by as much as 15% by moving the cash register from the right to the left

19. 14- 18 Concept of Space Big Grocery Stores  Most people shop the perimeter  Stores try to lure consumers down the aisles with end cap displays We’re buying less, right?  Cavernous Stores, Humvee-size carts, and pillowcase-size produce bags give the impression that customers are buying less, but really spending more

20. 14- 19 Slow Shoppers Down Mountain of Portobello mushrooms blocking produce aisle of Central Market Table of $25 lotions and bath salts blocking cosmetics counter at Saks Mirrors A place to sit down Shoppertainment web web Transition zone zone

21. 14- 20 Who does a good job with atmosphere? Who does a bad job?

22. 14- 21 The Future of Retailing  New retail forms and shortening retail life cycles  Wheel-of-retailing concept  Growth of nonstore retailing  Mail-order, television, phone, online shopping  Retail convergence Retailing

23. 14- 22  Rise of megaretailers  Growing importance of retail technology  Global expansion of major retailers  Retail stores as “Communities” or “Hangouts” Retailing The Future of Retailing Continued

24. 14- 23 Mall of America hosts over 520 specialty stores, 49 restaurants, and a theme park

25. 14- 24 Retailing Retailer Communities: Check out Playstation.com Playstation.com

26. 14- 25 Definitions Wholesaling  All activities involved in selling goods and services to those buying for resale or business use. Wholesaling  A firm engaged primarily in wholesaling activity.

27. 14- 26 Wholesalers add value by performing the following functions:  Selling and promoting  Buying and assortment building  Bulk-breaking  Warehousing  Transportation Wholesaling

28. 14- 27 Wholesalers add value by performing the following functions:  Financing  Risk bearing  Marketing information  Management services and advice Wholesaling

29. 14- 28 Wholesaling Full-service wholesalers  Wholesale merchants  Industrial distributors Limited service wholesalers  Cash-and-carry wholesalers  Truck wholesalers (jobbers)  Drop shippers  Rack jobbers  Producer’s cooperatives  Mail-order wholesalers Merchant Wholesalers Brokers and Agents Manufacturers’ and retailers’ branches and offices Types of Wholesalers

30. 14- 29 Wholesaling Brokers  Bring buyers and sellers together and assist in negotiation Agents  Manufacturers’ agents  Selling agents  Purchasing agents  Commission merchants Merchant Wholesalers Brokers and Agents Manufacturers’ and retailers’ branches and offices Types of Wholesalers

31. 14- 30 Wholesaling Sales branches and offices  Branches carry inventory: lumber, auto equipment, parts  Offices do not carry inventory: dry goods Purchasing officers  Perform roles similar to brokers and agents, however these individuals are employees of the organization Merchant Wholesalers Brokers and Agents Manufacturers’ and retailers’ branches and offices Types of Wholesalers

32. 14- 31 Figure 14-2: Wholesaler Marketing Mix Decisions

33. 14- 32 Wholesaler Marketing Decisions  Targeting may be made on the basis of:  Size of customer  Type of retailer  Need for service  Positioning Wholesaling

34. 14- 33 Wholesaler Marketing Decisions  Marketing mix decisions  Product and service assortment: inventory, line  Pricing: usual markup on COG is 20%  Promotion: largely disorganized and unplanned  Place: location, facilities Wholesaling

35. 14- 34 Trends in Wholesaling  Price competition is still intense  Successful wholesalers must add value by increasing efficiency and effectiveness  The distinction between large retailers and wholesalers continues to blur Wholesaling

36. 14- 35 More Trends in Wholesaling  More services will be provided to retailers  Many wholesalers are going global Wholesaling Wholesaler McKesson offers pharmacists a wide range of online resources