© 2002 Pearson Education Canada Inc principles of MARKETING Chapter 12 Retailing and Wholesaling

© 2002 Pearson Education Canada Inc Chapter Objectives Explain roles in the distribution channel Describe major types of retailers Identify major types of wholesalers Explain marketing decisions facing retailers and wholesalers

© 2002 Pearson Education Canada Inc Retailing All activities involved in selling goods or services directly to final consumers for their personal, non- business use –Most via retail stores –Non-store growing fast

© 2002 Pearson Education Canada Inc Store Retailing Classifications Amount of ServiceProduct LineRelative PricesRetail Organizations

© 2002 Pearson Education Canada Inc Store Retailing Classifications: Amount of Service Self-service retailers –Basis of all discount operations Limited-service retailers –Assist with information –Shopping goods Full-service retailers –Customers waited on –More specialty goods

© 2002 Pearson Education Canada Inc Store Retailing Classifications: Product Line Specialty stores Department stores Supermarkets –Scrambled merchandising Convenience stores Superstores –Category killers –Hypermarkets Service retailers

© 2002 Pearson Education Canada Inc Store Retailing Classifications: Relative Prices Discount stores Off-price retailers –Factory outlets –Independents –Warehouse clubs Wholesale clubs Membership warehouses

© 2002 Pearson Education Canada Inc Store Retailing Classifications: Retail Organizations TypeDescriptionExamples Corporate Chain Stores Voluntary Chains Retailer Co-ops Commonly owned and controlled Central buying and merchandising Similar lines of merchandise Wholesaler sponsored Independently owned, common buying and merchandising Independent retailers Central buying Joint promotion efforts La Senza Sports Experts Loblaws IGA Western Auto True Value Calgary Group Ace MEC

© 2002 Pearson Education Canada Inc Store Retailing Classifications: Retail Organizations TypeDescriptionExamples Franchise Organizations Merchandising conglomerates Contract between a franchiser and franchisee Right to own or operate one or more units Combines several diversified retailing lines Central ownership Some integrated distribution and management McDonald’s Subway, Pizza Hut Jiffy Lube, 7-Eleven Yogen Früz Venator Group (owns Foot Locker, Northern Reflections, Lady Foot Locker, Northern Traditions)

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions Retailer strategy Target market Retail store positioning Retailer Marketing mix Product and service assortment Prices Promotion Place (location)

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Target Market and Positioning Define target markets Select positioning Upscale - midscale - or downscale? Variety? Depth of assortment? Convenience? Low prices?

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Product Assortment and Services Product assortment –Width and Depth –Quality of goods –Must differentiate Unique product Blockbuster merchandising events Highly targeted

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Product Assortment and Services Services mix –Key to non-price competition Store atmosphere –Physical layout –Suits target market –Moves customer to buy –“Theatres”

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Price Decision High markups on lower volume? Lower markups on higher volume? Decide in relation to target market, product and service assortment, and competition

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Promotion Decision Advertising –Newspaper, magazine radio, TV, ‘Net, circulars, direct-mail –Cooperative advertising Personal selling –Training salespeople to greet, meet, and handle

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Promotion Decision Sales promotion –In-store demos, displays, contests, celebrities Public relations –Press conferences, speeches, store openings, special events, newsletters, magazines, public service activities

© 2002 Pearson Education Canada Inc Retailer Marketing Decisions: Place Decision Location, location, location! = ability to attract customers Facilities a major cost Central business district Shopping centre –Regional –Community –Neighbourhood Power centre

© 2002 Pearson Education Canada Inc The Future of Retailing New retail forms and shortening retail life cycles –Wheel of retailing Growth of non-store retailing –Canadian retailers slow to e-tail Not a threat Lack of senior commitment Order fulfillment challenge Lack of resources Measuring performance

© 2002 Pearson Education Canada Inc The Future of Retailing Increasing intertype competition Rise of mega-retailers Growing importance of retail technology Retail stores as “communities” or “hangouts”

© 2002 Pearson Education Canada Inc Wholesaling All activities involved in selling goods and services to those buying for resale or business use Better at performing one of the channel functions

© 2002 Pearson Education Canada Inc Types of Wholesalers Merchant Wholesalers –50 % of total volume Brokers and Agents –11% of total volume Manufacturers’ Sales Branches and Offices –31% of total volume

© 2002 Pearson Education Canada Inc Types of Wholesalers Merchant Wholesalers –Take title to merchandise they handle –Full-Service or Limited-Service Brokers and Agents –Broker: Brings buyers and sellers together, assists in negotiation –Agent: Represents buyers or sellers on a more permanent basis Manufacturers Sales Branches and Offices –By sellers or buyers themselves rather than through independent wholesalers

© 2002 Pearson Education Canada Inc Types of Wholesalers: Merchant Wholesalers Full-service wholesalers –Wholesale merchants –Industrial distributors Limited-service wholesalers –Cash-and-carry –Truck (jobbers) –Drop shippers –Rack jobbers –Producers’ cooperatives –Mail-order

© 2002 Pearson Education Canada Inc Types of Wholesalers: Brokers and Agents Brokers Agents –Manufacturers’ agents –Selling agents –Purchasing agents –Commission merchants

© 2002 Pearson Education Canada Inc Types of Wholesalers: Manufacturers’ and Retailers’ Branches and Offices Sales branches and offices Purchasing offices

© 2002 Pearson Education Canada Inc Wholesaler Marketing Decisions Wholesaler strategy Target market Retail store positioning Wholesaler Marketing mix Product and service assortment Prices Promotion Place (location)

© 2002 Pearson Education Canada Inc Wholesaler Marketing Decisions: Target Market and Positioning Can choose target market by: –Size of customer –Type of customer –Need for service –Other factors Build relationships –Automatic reordering –Management training –Sponsorship

© 2002 Pearson Education Canada Inc Wholesaler Marketing Decisions: Marketing Mix Product –Profitability –Define services –Find mix valuable to target customers Price –Low profit margins –Standard mark-ups Promotion –Not well done –Personal selling behind the times –Make greater use of supplier materials Place –Location and facilities –Automation

© 2002 Pearson Education Canada Inc Trends in Wholesaling Fierce resistance to price increases –Improve services and reduce costs Competition Consolidation More services Blurred distinction between large and small

© 2002 Pearson Education Canada Inc Chapter Review What are the roles of retailers and wholesalers in the distribution channel? What are the major types of retailers? What are the major types of wholesalers? Discuss the marketing decisions that retailers and wholesalers face