Chapter 15 Managing Retailing, Wholesaling, and Market Logistics PowerPoint by Yu Hongyan Business School of Jilin University

Objectives Retailing Wholesaling Logistic

1. Retailing Retailing Basics Retail life cycle Wheel-of-retailing Types of retailers Marketing decisions Retailing trends Retail life cycle Wheel-of-retailing Service levels Retail positioning strategies Nonstore retailing Corporate retailing

1. Retailer (cont’d) What means retailer? A retailer is any business enterprise whose sales volume comes primarily from retailing

1. Retailer (cont’d) Store Type Length and Breadth of Product Assortment Specialty Stores Narrow Product Line, Deep Assortment Department Stores Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items Supermarkets Wide Variety of Food, Laundry, & Household Products Convenience Stores Limited Line of High-Turnover Convenience Goods Discount Stores Broad Product Line, Low Margin, High Volume Off-Price Retailer Inexpensive, Overruns, Irregulars, and Leftover Goods Superstores Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Catalog Showroom Broad Selection, Fast Turnover, Discount Prices

Retailing Retail-store types pass through the retail life cycle.

Wheel of Retailing New Entrants . Mid Price Mid Status Mid Margin Low Price Low Status Low Margin High Price High Status High Margin New Entrants

1. Retailer (cont’d) Four Levels of Retail Service Self-service Locate, compare, and select process Self-selection Find, and can ask help Limited-service Need more information and assistance Full-service

Discussion Scenario “Catalogue retailers,” popular in the 1980’s, are now all but extinct. Customers at such stores would view display items in a showroom, submit “tickets” listing desired items to clerks, and await delivery of their purchases at checkout via conveyor belt. What retail form precipitated the decline of catalogue retailers? Can you identify an emerging retail form or one that is in decline?

Retail Positioning Map Broad Narrow Breadth of product line Bloomingdale’s 卓展 Wal-Mart 卖场 Tiffany Specialty Nike Sunglass Hut Shoe Value added Low High

1. Retailer (cont’d) Four broad retail positioning strategies include: Bloomingdale’s Tiffany Sunglass Hut Wal-Mart Non-store retailing has been growing faster than store retailing

1. Retailer (cont’d) Direct Selling Direct Marketing Automatic Vending NonStore Retailing Accounts for More Than 12% of All Consumer Purchases, and is trending up. Automatic Vending Buying Services 安利 Type of nonstore retailing

1. Retailer (cont’d) Retailing Basics Target market Types of retailers Marketing decisions Retailing trends Target market Product assortment and placement Services mix and store atmosphere Price Promotion== Place

Promotion Advertising Special sales Money saving coupons Frequent shopper rewards In store sampling In store coupon Rebate Any more?

Retailing Location Options for Retailers General Business District Regional Shopping Center Community Shopping Center Strip mall (Shopping Strip) Location within a larger store or operation

Discussion Scenario Restaurants such as McDonald’s and Subway have attempted to expand their distribution by opening stores within gas stations, or mass merchandisers such as Wal-Mart. In some instances, stores offer limited menus or drive-thru service only. Aside from fast food restaurants, what other types of retail businesses have followed a similar strategy?

Retailing Retailing Basics Types of retailers Marketing decisions Retailing trends New retail forms Intertype competition Growth of giant retailers Technology Global expansion Selling experiences Competition between store-based and non-store-based retailing

2. Wholesaling Wholesaling Wholesaling basics Types of wholesalers Marketing decisions Wholesaling trends Wholesaling excludes manufacturers, farmers, and retailers Wholesalers differ from retailers in three key ways Wholesalers handle many functions more efficiently than do manufacturers

2. Wholesaling (cont’d) 1. The Definition of Wholesaling Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use. Wholesale excludes manufactures and farmers because they are engaged in production

2. Wholesaling (cont’d) Difference between R and W Wholesale pay less attention to promotion, atmosphere and location because they are dealing with business customers rather than final consumer Wholesale are usually larger than retail transaction, and cover a larger trade areas than retailers The government deals with wholesalers and retailer differently regards legal regulations and tax

Why Are Wholesalers Used? Management Services & Advice Selling and Promoting Wholesaler Functions Market Information Buying and Assortment Building Risk Bearing Bulk Breaking Financing Warehousing Transporting

2. Wholesaling (cont’d) 2. The Growth of Wholesaler Growth of larger factories located some distance from the principal buyers Production in advance of orders rather than in response to specific orders Increase in the number of levels of intermediate producer and user

2. Wholesaling (cont’d) Wholesaler Functions Selling and Promoting Market Information Bulk breaking Risk Bearing Wholesaler Functions Warehousing Financing Buying and Assortment Building Transportation

2. Wholesaling (cont’d) Wholesaling Wholesaling basics Growth and types of wholesalers Marketing decisions Wholesaling trends Wholesalers vary in type and function Wholesaling has been growing due to two key factors: Many factories are located far from buyers An increasing need to adapt product quantities, features, or packages to meet buyer needs

Major Wholesaler Types 2. Wholesaling (cont’d) Major Wholesaler Types Merchant wholesalers Full-service wholesalers Limited-service wholesalers Brokers & agents Brokers Agents Manufacturers’ and retailers’ branches and offices Miscellaneous wholesalers

2. Wholesaling (cont’d) Wholesaling Wholesaling basics Types of wholesalers Marketing decisions Wholesaling trends Target market Product assortment and placement Price Promotion Place

2. Wholesaling (cont’d) Wholesaling Wholesaling basics Types of wholesalers Marketing decisions Wholesaling trends Direct buying trends initially threatened wholesalers Wholesalers have adapted by: Adding value Reducing costs Strengthening relationships with manufacturers

3. Market Logistics Interrelated Aspects of Market Logistics Offset Value Network Market Logistics Offset Physical Distribution Compensation Deal Demand Chain Planning Supply Chain Management Integrated Logistics Systems

3. Market Logistics (cont’d) McKesson offers online supply management

3. Market Logistics (cont’d) Key Elements Market-logistics objectives Market-logistics decisions Market logistics lessons Logistics involve trade-offs between costs and customer service Maximizing profits, not sales, is key A total system basis should be considered Designing a system that will minimize the cost of achieving objectives should be the outcome

3. Market Logistics (cont’d) Calculating the Cost of Market-Logistics Systems M = T + FW + VW + S Where . . . M = total market-logistics cost of proposed system; T = total freight cost of proposed system; FW = total fixed warehouse cost of proposed system; VW = total variable warehouse cost of proposed system S = total cost of lost sales due to average delivery delay

3. Market Logistics (cont’d) Key Elements Market-logistics objectives Market-logistics decisions Market logistics lessons Order processing Warehousing Storage, distribution, automated warehouses Inventory Determine reorder point, relevant cost comparison, optimal order quantity Transportation Containerization Private vs. contract carriers

3. Market Logistics (cont’d) Order Processing Submitted Processed Shipped Costs Minimize Costs of Attaining Logistics Objectives Logistics Functions Transportation Water, Truck, Rail, Pipeline & Air Warehousing Storage Distribution Inventory When to order How much to order Just-in-time

Transportation Modes Rail Truck Water Pipeline Air Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items

3. Market Logistics (cont’d) Key Elements Market-logistics objectives Market-logistics decisions Market logistics lessons A senior V.P. is needed as the single contact point for all logistical elements Senior V.P. must maintain close control Software and systems are essential for competitively superior logistics performance

Review Retailing Wholesaling Logistics