Retailing and Wholesaling Chapter 11

Rest Stop: Previewing the Concepts Explain the roles of retailers in the distribution channel and describe the major types of retailers Describe the major retailer marketing decisions Discuss the major trends and developments in retailing Explain the major types of wholesalers and their marketing decisions

First Stop: Walmart: The World’s Largest Retailer Dedicated to its long-time, low-price value proposition: “Save money. Live better” Low costs let the retailer charge lower prices but still reap higher profits Keeps costs down through: Superior management and sophisticated technology Getting the best prices from suppliers

All activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use Retailing A business whose sales come primarily from retailing Retailer

Shopper Marketing Using point-of-sale promotions and advertising to extend brand equity to “the last mile” and encourage favorable in-store purchase decisions Note to Instructor: Shopper marketing involves focusing the entire marketing process—from product and brand development to logistics, promotion, and merchandising—toward turning shoppers into buyers at the point of sale. Shopper marketing: Influencing consumers’ buying decisions as they shop now involves efforts aimed at in-store, online, and mobile shopping

Types of Retailers The different types of retailers can be classified based on: Amount of service they offer Breadth and depth of product lines Relative prices charged The way they are organized

Types of Retailers: Amount of Service Serve customers who are willing to perform their own locate-compare-select process Self-service retailers Provide more sales assistance as they carry shopping goods about which details are needed Limited-service retailers Usually carry more specialty goods for which customers need or want assistance or advice Full-service retailers

Types of Retailers: Product Line A retail store that carries a narrow product line with a deep assortment within that line Specialty stores A retail store that carries a wide variety of product lines, each operated as a separate department managed by specialist buyers or merchandisers Department stores A large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of grocery and household products Supermarkets

Kroger, America’s Largest Grocery-Only Retailer Thanks to customer-focused pricing, Kroger’s sales and market share gains have been the best in the industry despite a sagging economy

Types of Retailers: Product Line A small store, located near a residential area, that is open long hours seven days a week and carries a limited line of high-turnover convenience goods Convenience store A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, non-food items, and services Superstore A giant specialty store that carries a very deep assortment of a particular line Category killer A retailer whose product line is actually a service; examples include hotels, airlines, banks, colleges, and many others Service retailer

Convenience Stores Sheetz positions itself as more than just a convenience store Driven by its Total Customer Focus mission and the motto, “Feel the Love,” Sheetz aims to provide “convenience without compromise”

Types of Retailers: Relative Prices Sell standard merchandise at lower prices and margins, in return for higher volume Discount stores: Buy merchandise at less-than-regular wholesale prices sells at less than retail Off-price retailers:

Types of Off-Price Retailers An off-price retailing operation that is owned and operated by a manufacturer and normally carries the manufacturer’s surplus, discontinued, or irregular goods Factory outlet An off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing, and other goods at deep discounts to members who pay annual membership fees Warehouse club

Marketing at Work Dollar General aims to save customers time and money Smaller stores cost less to operate, and locating them in and less glamorous areas keeps real estate costs down Discounter Dollar General, the nation’s largest small-box discount retailer, makes a powerful value promise for the times: “Save time. Save money. Every day”

Types of Retailers: Organizational Approach Two or more outlets that are commonly owned and controlled Corporate chains Wholesaler-sponsored group of independent retailers that engage in group buying and common merchandising Voluntary chains

Types of Retailers: Organizational Approach A contractual association between a manufacturer, wholesaler, or service organization (a franchisor) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system Franchising

Franchise These days, it’s nearly impossible to stroll down a city block or drive on a suburban street without seeing an abundance of franchise businesses

Figure 11.1 - Retailer Marketing Strategies Note to Instructor: As with other types of marketers, the name of the game for retailers is to find the customer-driven marketing strategy and mix that will let them create value for customers and capture value in return. Remember Target’s “Expect more. Pay less.” value proposition? And Olive Garden’s “When you’re here, you’re family.”

Retailer Marketing Decisions Segmentation Targeting Store differentiation Positioning Note to Instructor: Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Should the store focus on upscale, midscale, or downscale shoppers? Do target shoppers want variety, depth of assortment, convenience, or low prices? Until they define and profit their markets, retailers cannot make consistent decisions about product assortment, services, pricing, advertising, store décor, or any of the other decisions that must support their positions.

Retail Targeting and Positioning By positioning itself strongly away from Wal-Mart and other discounters, Whole Foods has made itself one of the nation’s fastest-growing and more profitable food retailers Whole Foods Market focuses on selling high-quality natural and organic foods

Retailer Marketing Decisions Retailer marketing mix: Product and service assortment Retail prices Promotion Distribution (location) Retail strategy and retail marketing mix must combine to create value for targeted retail customers

Retailer Marketing mis Retail marketing mix: Product assortment should differentiate the retailer while matching target shoppers’ expectations Services mix can help differentiate one retailer from another Store atmosphere is important as a unique store experience can move customers to buy Experiential retailing is growing in popularity

Store Atmosphere The Cabella’s “experience” has made it a tourist destination

Price Decisions Price policy must fit with the target market and positioning, product and service assortment, competition, and economic factors Price promotions and EDLP High-low pricing

Pricing for the Target Segment Bergdorf Goodman caters to the upper crust with prices to match

Retailer Marketing Decisions 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

Distributio 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

Shopping Centers Today Today’s shopping centers are more about creating places to be rather than just places to buy

Retail Trends & Developments New retail forms, shortening retail life cycles, and retail convergence Rise of megaretailers Growth of direct and online retailing Growing importance of retail technology Green retailing Global expansion of major retailers

Online Retailing The Internet has spawned a whole new breed of shoppers – people who just can’t buy anything unless they first look it up online and get the lowdown

Retail Technology Stop & Shop uses technology to make shopping faster and more convenient for customers

Green Retailing McDonald’s new eco-friendly restaurants are designed from the bottom up with a whole new eco-attitude

Fuel for Thought Many retail stores are becoming “communities” or “hangouts” either in the brick-and-mortar or virtual worlds What can retailers do to make their brick-and- mortar stores “community friendly”? Are there circumstances in which it would be undesirable to encourage patrons to “hang- out”? Explain.

All activities involved in selling goods and services to those buying for resale or business use Wholesaling Note to Instructor: Wholesalers add value for producers by performing one or more channel functions.

Wholesaling Many of the nation’s largest and most important wholesalers—like Grainger— are largely unknown to final consumers Grainger offers more than 900,000 maintenance, repair, and operating (MRO) items to over 1.8 million customers Grainger’s value proposition is simple: to make it easier and less costly for buyers to purchase MRO items

Functions Wholesalers Perform Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing

Types of Wholesalers Merchant wholesaler: An independently owned wholesale 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

Types of Wholesalers: Brokers 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

Types of Wholesalers Manufacturers’ sales branches and offices: Involves wholesaling by sellers or buyers themselves rather than through independent wholesalers

Figure 11.2 - Wholesaler Marketing Strategies Note to Instructor: Like retailers, wholesalers must develop customer-driven marketing strategies and mixes that create value for customers and capture value in return. For example, Grainger helps its business customers “save time and money by providing them with the right products to keep their facilities up and running.”

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 Blurring distinction between large retailers and wholesalers

Trends in Wholesaling The tight economy and the demand for increased services have put the squeeze on wholesaler profits Wholesalers have to find efficient ways to deliver value to customers to stay in the race Increased use of computerized, automated, and Internet-based systems will help wholesalers contain their costs 11 - 43

Marketing in Action Pharmaceutical wholesaler McKesson helps its retail pharmacist customers to be more efficient by offering a wide range of online resources

Rest Stop: Reviewing the Concepts Explain the roles of retailers in the distribution channel and describe the major types of retailers Describe the major retailer marketing decisions Discuss the major trends and developments in retailing Explain the major types of wholesalers and their marketing decisions

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall