Chapter 12 Retailers, Wholesalers and Their Strategy Planning Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12-2 At the end of this presentation, you should be able to: 1. understand how retailers plan their marketing strategies. 2. know about the many kinds of retailers that work with producers and wholesalers as members of channel systems. 3. understand how retailers evolve, including the roles of technology, scrambled merchandising, and the “wheel of retailing.” 4. see why size or belonging to a chain can be important to a retailer.

12-3 At the end of this presentation, you should be able to: 5. understand some of the differences in retailing in different nations. 6. know what progressive wholesalers are doing to modernize their operations and marketing strategies. 7. know the various kinds of merchant and agent wholesalers and the strategies they use. 8. understand important new terms

12-4 Marketing Strategy Planning for Retailers and Wholesalers (Exhibit 12-1) CH 12: Retailers, Wholesalers & Their Strategy Planning Strategy planning for retailers CH 10: Place and Development of Channel Systems Nature of retailing CH 11: Distribution Customer Service & Logistics Strategy planning for wholesalers

12-5 The Nature of Retailing Retailer size and profits Differences in retailing in different nations Evolution of Retailing

12-6 Examples of Marketing Strategy Decisions for Retailers (Exhibit 12-3) Advertising Publicity Salespeople (number and training) Helpful information (demonstrations, displays, online videos, reviews) Credit cards – whether to offer a store card Discount policies Frequency and level of sale prices Charge (or not) for delivery or other services Physical stores and/or sales over the Internet Number/location of stores Shopping atmosphere (comfort, safety) Store size, layout & design Store hours Product selection (width and depth of assortment, brands, quality) After-sale service Special services (special orders, entertainment, gift wrap)

12-7 Shopping Atmosphere Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12-8 Conventional Retailers—Try to Avoid Price Competition (Exhibit 12-4) Conventional Offerings Single- & limited- line stores Specialty shops & department stores Ritz Camera, Coach, Gap, Macy’s Expanded assortment & service Supermarkets, disc. houses, mass merch., superstores, club stores Safeway, IKEA, Home Depot, Costco Expanded assortment &/or reduced margins & service C-stores, ven- ding machines, door-to-door, phone, mail, some e-tail Pepsi vending machines, 7-11, Avon, Lands’ End, QVC Added convenience, higher margins, reduced assortment Internet eBay, Amazon, Zappos, Netflix, Dell Expanded assortment, reduced margins, more information

12-9 Conventional Retailers—Try to Avoid Price Competition (Exhibit 12-4) Conventional Offerings Single- & limited- line stores Single- & limited- line stores Specialty shops & department stores Ritz Camera, Coach, Gap, Macy’s Expanded assortment & service

12-10 Conventional Retailers—Try to Avoid Price Competition (Exhibit 12-4) Conventional Offerings Single- & limited- line stores Expanded assortment & service Specialty shops & department stores Ritz Camera, Coach, Gap, Macy’s Expanded assortment &/or reduced margins & service Supermarkets, disc. houses, mass merch., superstores, club stores Safeway, IKEA, Home Depot, Costco

12-11 Interactive Exercise: Types of Retail Outlets Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12-12 Checking Your Knowledge Parties R Us is a large store containing nothing but party supplies. The store carries everything from costumes to party favors, decorations to invitations, and paper plates to birthday candles. The selection is huge and prices are low. There is even a party consultant on hand to help plan parties. Parties R Us is a: A.department store. B.catalog retailer. C.category killer. D.convenience store.

12-13 Conventional Retailers – Try to Avoid Price Competition (Exhibit 12-4) Supermarkets, disc. houses, mass merch., superstores, club stores Safeway, IKEA, Home Depot, Costco Specialty shops & department stores Ritz Camera, Coach, Gap, Macy’s Conventional Offerings Single- & limited- line stores Expanded assortment & service Expanded assortment &/or reduced margins & service C-stores, ven- ding machines, door-to-door, phone, mail, some e-tail Pepsi vending machines, 7-11, Avon, Lands’ End, QVC Added convenience, higher margins, reduced assortment

12-14 Vending Machines are Convenient

12-15 Shop at Home in a Variety of Ways In-Home Shopping Door-to- door Selling Cable Television QVC

12-16 Conventional Retailers—Try to Avoid Price Competition (Exhibit 12-4) Supermarkets, disc. houses, mass merch., super-, club- stores Safeway, IKEA, Home Depot, Costco C-stores, vending, door- to-door, phone, mail, some e-tail 7-11, Pepsi vending, Avon, Lands’ End, QVC Conventional Offerings Single- & limited- line stores Specialty shops & dept. stores Ritz Camera, Coach, Gap, Macy’s Expanded assortment & service Expanded assortment &/or reduced margins & service Added conv., higher margins, reduced assortment Internet eBay, Amazon, Zappos, Netflix, Dell Expanded assortment, reduced margins, more information

12-17 Retailing on the Internet Showrooming New Meaning of Convenience Online Costs for Retailers & Customers Internet Retailing Brick & Mortar Stores Add Online Capabilities Big Data

12-18 Competitive Effects Influence Other Retailers Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12-19 Why Retailers Evolve and Change Product Life Cycle Applies to Retailing Scrambled Merchandising = Higher Profits Ethical Issues May Arise Technology Driven The “Wheel of Retailing” Keeps on Rolling!

12-20 Why Retailers Evolve and Change

12-21 Checking Your Knowledge Walgreen’s, CVS, and other “drugstores” have become scaled-down versions of mass-merchandisers by adding small appliances, housewares, food, and other items to their traditional lines. This type of “scrambled merchandising” is meant to deal with the increasing desire that consumers have for: A.personal service. B.convenience. C.low prices. D.prestigious brand names. E.quality.

12-22 Retailer Size and Profits Cooperative Chain Corporate Chain Voluntary Chain Big Retailers Franchise Operations

12-23 Big Chains Are Building Market Clout Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12-24 Differences in Retailing in Different Nations New Ideas Spread Online Retailing Varies Must Adapt Marketing Strategies Mass-Marketing Requires Mass Markets

12-25 What Is a Wholesaler? Progressive Wholesalers Adapt Changing with the Times In Decline New Strategies Needed to Survive

12-26 Wholesalers Add Value in Different Ways (Exhibit 12-7) 26.3% 9.6% 64.1% Percent of all wholesale sales 7.9% 3.7% 13.1% Costs as a percent of sales Percent of wholesale establishments 4.7% 10.4% 84.9% 20.0%40.0%60.0%80.0%100.0%0.0% Merchant wholesalers Agent wholesalers Manufacturer sales branches

12-27 Types of Wholesalers (Exhibit 12-8) Does wholesaler own the products? Agent wholesalers Auction companies Brokers Manufacturers’ agents Selling agents No How many functions does the wholesaler perform? Yes ( Merchant wholesalers) Service merchant wholesaler General merchandise wholesalers (or mill supply houses) Single-line or general-line wholesalers Specialty wholesalers All functions Limited-function merchant wholesaler Cash-and-carry wholesaler Drop-shippers Truck wholesalers Rack jobbers Catalog wholesalers Some functions

12-28 Types of Merchant Wholesalers Service General merchandise Single-line (or general-line) Specialty Limited - Function Cash-and- Carry Drop-Shippers Truck Rack Jobbers Catalog

12-29 Agents Are Strong on Selling Manufacturer’s Agents Brokers Selling Agents Auction Companies Types of Agent Wholesalers

12-30 Checking Your Knowledge Atlantic Music distributes various types of musical instruments, sheet music, and accessories that are sold through independent music stores. It carries many different brands, such as Remo and Ludwig drums, and brass instruments from Yamaha, Hohner, and other manufacturers. Atlantic takes title to the musical instruments and supplies it resells, and provides a wide variety of services to its customers. Atlantic Music is a(n): A.merchant wholesaler. B.limited service merchant wholesaler. C.auction company. D.manufacturer’s broker. E.intermediary.

12-31 You should now be able to: 1. understand how retailers plan their marketing strategies. 2. know about the many kinds of retailers that work with producers and wholesalers as members of channel systems. 3. understand how retailers evolve, including the roles of technology, scrambled merchandising, and the “wheel of retailing.” 4. see why size or belonging to a chain can be important to a retailer.

12-32 You should now be able to: 5. understand some of the differences in retailing in different nations. 6. know what progressive wholesalers are doing to modernize their operations and marketing strategies. 7. know the various kinds of merchant and agent wholesalers and the strategies they use. 8. understand important new terms

Key Terms 1. retailing 2. general stores 3. single-line stores 4. limited-line stores 5. specialty shop 6. department stores 7. mass-merchandising concept 8. supermarkets 9. discount houses 10. mass-merchandisers 11. supercenters (hypermarkets) 12. convenience (food) stores 13. automatic vending 14. door-to-door selling 15. wheel of retailing theory 12-33

Key Terms 16. scrambled merchandising 17. corporate chain 18. cooperative chains 19. voluntary chains 20. franchise operation 21. wholesaling 22. wholesalers 23. manufacturers’ sales branches 24. merchant wholesalers 25. service wholesalers 26. general merchandise wholesalers 27. single-line (or general-line) wholesalers 28. specialty wholesalers 29. limited-function wholesalers 30. cash-and-carry wholesalers 31. drop-shippers 12-34

Key Terms 32. truck wholesalers 33. rack jobbers 34. catalog wholesalers 35. agent wholesalers 36. manufacturer’s agents 37. export agents 38. import agents 39. brokers 40. export brokers 41. import brokers 42. selling agents 43. combination export manager 44. auction companies 12-35