Chapter 1 Retailing and Wholesaling 11 Retailing and Wholesaling

ROAD MAP: Previewing the Concepts Explain the roles of retailers and wholesalers in the distribution channel. Describe the major types of retailers and give examples of each. Identify the major types of wholesalers and give examples of each. Explain the marketing decisions facing retailers and wholesalers.

What is Retailing? Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use.

Types of Retailers Retailers are classified based on: Amount of Service They Offer Breadth & Depth of Product Lines Relative Prices Charged How They Are Organized

Amount of Service Self-Service Retailers: Limited-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 because they carry more shopping goods about which customers need information. Full-Service Retailers: Usually carry more specialty goods for which customers like to be “waited on.”

Product Line Classification Specialty Stores: Carry narrow product lines with deep assortments within those lines. Department Stores: Carry a wide variety of product lines—typically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.

Product Line Classification Supermarket: Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products. Convenience Stores: Small stores located near residential areas that are open long hours 7 days a week and carry a limited line of high-turnover convenience goods.

Web-Based Supermarket In the battle for “share of stomachs,” Safeway and many large supermarkets have added Web-based sales.

Product Line Classification Superstores: Much larger than regular supermarkets and offer a large assortment of routinely purchased food products, nonfood items, and services. Category Killers: Giant specialty stores that carry a very deep assortment of a particular line and is staffed by knowledgeable employees.

Chapter 1 Discussion Question What type of impact did the emergence of category killers have on department stores?

Relative Prices Classification Discount Store: A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. Off-Price Retailer: Retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.

Relative Prices Classification Factory Outlet: Off-price retailing operation that is owned and operated by a manufacturer and that normally carries the manufacturer’s surplus, discontinued, or irregular goods. Independent Off-Price Retailer: Off-price retailer that is either owned and run by entrepreneurs or is a division of a larger retail operation.

Factory Outlets Factory outlet malls and value-retail centers have blossomed in recent years, making them one of retailing’s hottest growth areas.

Relative Prices Classification Warehouse Club: Off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees. Click Here to Visit Sam's Club

Organizational Classification Chain Stores: Two or more outlets that are owned and controlled, have central buying and merchandising, and sell similar lines of merchandise. Voluntary Chain: A wholesaler-sponsored group of independent retailers that engages in bulk buying and common merchandising.

Organizational Classification Retailer Cooperative: A group of independent retailers that bands together to set up a jointly owned, central wholesale operation and conducts joint merchandising and promotion efforts. Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

Franchising Franchisees now command 35% of all retail sales in the U.S. Subway is one of the fastest growing franchises, with nearly 20,000 shops in 74 countries.

Organizational Classification Merchandising Conglomerates: A free-form corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of their distribution and management functions.

Retailer Marketing Decisions

Assortment and Services Decisions Product Assortment: Brand of merchandise Merchandising events Services Mix: Different numbers and types of services are key to non-price store differentiation Store Atmosphere: Physical layout and “feel” of the store

Price, Promotion, & Place Decisions Price policy must fit its target market and positioning, product and service assortment, and competition Can use any or all of the promotion tools—advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers Retailers can locate in CBDs, various types of shopping centers, strip malls, or power centers Location, Location, Location!

Mall of America Click Here to Visit the Mall of America Chapter 1 Mall of America The Mall of America “megamall” contains: Over 520 specialty stores 49 restaurants 7-acre indoor theme park Underwater World featuring hundreds of marine specimens A two-story miniature golf course. Click Here to Visit the Mall of America

The Future of Retailing Chapter 1 The Future of Retailing New Retail Forms and Shortening Retail Life Cycles Growth of Nonstore Retailing Retail Convergence Rise of the Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers 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.

Functions Provided by Wholesalers Selling & Promoting Management Services & Advice Buying & Assortment Building Market Information Bulk-Breaking Risk Bearing Warehousing Financing Transportation

Types of Wholesalers Merchant Wholesalers Largest group of wholesalers Account for 50% of wholesaling Two broad categories: Full-service wholesalers Limited-service wholesalers

Types of Wholesalers Brokers and Agents Do not take title to goods Perform fewer functions Brokers bring buyers and sellers together Agents represent buyers on more permanent basis Manufacturers’ agents are most common type of agent wholesaler

Types of Wholesalers Manufacturers’ Sales Branches and Offices Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

Wholesaling In Action Grainger is by far the world’s leading wholesaler of maintenance, repair, and operating supplies. Click Here to Explore Grainger's Website

Wholesaler Marketing Decisions

Must Constantly Improve Services and Reduce Costs Distinction Between Large Retailers & Wholesalers is Blurry Chapter 1 Trends in Wholesaling Will Continue to Increase the Services Provided to Retailers Wholesalers Are Now Going Global

Rest Stop: Reviewing the Concepts Chapter 1 Rest Stop: Reviewing the Concepts Explain the roles of retailers and wholesalers in the distribution channel. Describe the major types of retailers and give examples of each. Identify the major types of wholesalers and give examples of each. Explain the marketing decisions facing retailers and wholesalers.