Presentation on theme: "Retailing and Wholesaling"— Presentation transcript:
1 Retailing and Wholesaling PRINCIPLES OF MARKETINGEighth EditionPhilip Kotler and Gary ArmstrongChapter 13Retailing andWholesaling
2 What is Retailing?All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.Retailers - businesses whose sales come primarily from retailing.Retailers can be classified as:Store retailers such as Home Depot, Sears, WalmartNonstore retailers such as the mail, telephone, and Internet.
3 Classification of Retail Stores Amount of ServiceSelf-Service, Limited-Service andFull-Service RetailersClassification of Retail StoresThis CTR relates to the material on ppClassification of Retail StoresProduct LineLength and Breadth of the ProductAssortmentRelative PricesPricing Structure that is Usedby the RetailerRetail OrganizationsIndependent, Corporate, or ContractualOwnership OrganizationStore Retailing ClassificationsRetailing includes all the activities in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailers may be divided into two types: store retailing and non store retailing. Store retailing accounts for most retail business. Typical store classifications include:Amount of Service. Self-service retailing is used by convenience goods sellers and most discounters. Limited-service retailers provide sales service to support shopping goods lines carried and may offer additional services such as credit. Full-service retailers are often specialty stores with narrow product lines with deep assortment and knowledgeable salespeople.Product Line Sold. Specialty stores carry narrow product lines. Department stores carry a wide variety of lines. Supermarkets feature low-cost, high-volume, self-service on food, laundry, and household items. Convenience stores are small units that carry a limited line of high turnover items. Superstores, Combination Stores, and Hypermarkets are variations on much larger versions of supermarkets also offering other lines and/ore services.Relative Prices. Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. Off-price Retailers buy at lower than regular wholesale and sell under regular retail. The three major off-price retailers are: Factory Outlets that are owned & operated by manufacturers; Independents owned by entrepreneurs or divisions of larger corporations; and Wholesale clubs selling deeply discounted merchandise to paying members. Catalog Showrooms sell high-markup, fast-moving brand names at discount prices.Retail Organization % of retail operations are independents, although larger chains control a much larger share of the market (See following CTR).
4 Classification By Product Line Store Type Length and Breadth of Product AssortmentSpecialty StoresNarrow Product Line, Deep AssortmentDepartment StoresWide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household ItemsSupermarketsWide Variety of Food, Laundry, & Household ProductsConvenience StoresLimited Line of High-Turnover Convenience GoodsSuperstoresLarge Assortment of Routinely Purchased Food & Nonfood Products, Plus ServicesCategory KillersGiant Specialty Store that Carries a Very Deep Assortment of a Particular LineHypermarketsHuge Superstores
5 Classification By Retail Organization This CTR relates to the discussion on ppMerchandisingConglomeratesCorporateChainsControl of OutletsMajor forms of categorization of retailers by control of outlets include:Corporate Chains Corporate chains consist of two or more outlets that are commonly owned and controlled, employ central buying, and sell similar lines.Voluntary Chains. These are wholesaler sponsored chains that nominally independent outlets join to save in costs. The wholesaler controls centralized planning, buying, and promotion decisions.Retailer Cooperatives. These are jointly owned wholesale operations controlled by the retail members.Franchise Organizations. A franchise is a contractual association between a manufacturer, wholesaler, or service organization and independent businesspeople.Merchandising Conglomerates. These are corporations that combine several different retailing forms under central ownership and share distribution and management functions.FranchiseOrganizationsVoluntaryChainsRetail OrganizationsRetailerCooperatives
6 Characteristics of Direct Marketing This CTR relates to the material on p. 398.Characteristics of Direct MarketingPrivacyTargetedIndividualsResponseMeasurementCustomizedOfferKeyCharacteristicsofDirectMarketingDirect MarketingBenefits to sellers include:Targeted Individuals. Customers can be selected from compiled list by almost any segmentation variable.Customized Offer. Specific characteristics of individual customers can be addressed in the offer.Immediate Orders. It is used to obtain immediate orders from targeted customers.Continuous Customer Relationship. Actual customer patterns of behavior and indicated preferences can be tracked, further narrowing subsequent offers to product known to be wanted by the customer.Higher Response. Direct marketing materials receive higher response rates than other forms of marketing communication.Testing. Variations on the marketing mix can be readily tested.Response Measurement. As customer response is directly related to specific materials, measurement is facilitated.Privacy. Some forms of direct media can be protected from viewing by competitors.TestingImmediateOrdersHigherResponseContinuousRelationship
7 Types of NonStore Retailing This CTR refers to the discussion on ppDirect MarketingNonstore Retailing Accounts for More Than 14% of All Consumer Purchases, and May Account for 33% of All Sales by 2000.Direct SellingAutomatic VendingCatalogs & Direct MailDirect MarketingDirect Marketing. Direct marketing uses various media to interact with consumers, generally calling for the consumer to make a direct response to the offer being made in real time. Direct marketing offers consumers the benefits of greater convenience and time and place utility.Direct Selling. Door-to-door retailing offers consumers products at their door.Automatic Vending. Automatic vending involves selling directly to customers through machines. This form offers time and place utility.Other forms include:Catalogs and Direct Mail.TV Shopping Shows.Online Shopping.Home and Office Parties.TV Shopping ShowsOnline ShoppingHome & Office Parties
8 Retailer Marketing Decisions This CTR relates to the material on ppRetailer Marketing DecisionsRetailer MarketingMixRetailer StrategyProduct and Service AssortmentPricesPromotionPlace (Location)Retailer Marketing DecisionsTarget Market Decision. These decisions require that the retailer carefully consider exactly what kind of customer they want to serve. Store image should support the needs and expectations of the target market in every respect.Product Assortment and Services Decision. These decisions include matching product assortment width and depth and quality levels to shopper expectations. Variations in service mixed offerings can help retailers differentiate. Store atmosphere should be considered an assortment/service mix variable.Price Decision. These decisions revolve around high margin/low volume vs. low margin/high volume approaches. May include traffic builders or loss leader tactics.Promotion Decision. Promotions tools available to retailers include all elements of the promotional mix . Major decisions may include tie-ins with producer promotions.Place . Key place decisions remain three: location, location, location!Target MarketRetail Store Positioning
9 Key Tool of Nonprice Competition for Setting One Store Apart From Product Assortment DecisionsWidth and Depth of AssortmentQuality of ProductsProduct Differentiation StrategiesRetailer’s Product Assortment and Services DecisionsClick to add titleServices MixKey Tool of Nonprice Competitionfor Setting One Store Apart FromAnother.Store’s AtmospherePhysical Layout“Feel” That Suits the Target Marketand Moves Customers to Buy
10 Product & Services Assortment Click to add titleRetailer’s Price, Promotion, and Place DecisionsPrice DecisionsTarget MarketProduct & Services AssortmentCompetitionPromotion DecisionsUsing Advertising, Personal Selling, Sales Promotion and Public Relations to Reach Customers.Place DecisionsShopping Centers, Central Business Districts, Power Centers, or Outlet Malls. Location!
11 The Wheel of Retailing High Margin High Price High Status 1 3 2 2 3 1 This CTR relates to the discussion on pp. 406.Instructor’s Note: The CTR and Notes contain substantial extra-textual material for expanded in-class discussion.High MarginHigh PriceHigh StatusThe Future of RetailingThe wheel of retailing concept states that new retailing forms begin as low-margin, low-price, high volume, low status operations that slow evolve and upgrade their facilities over time. The advent of category killers and inventory tracking using high technology may signal a new development whereby value pricing retailers stay on the low-margin, high-volume end of the retailing scale while constantly improving product quality and consumer value.The Wheel of Retailing is a theory that attempts to explain how new retail institutions enter the marketplace and how they tend to evolve and eventually decline. Outlined and summarized briefly, the theory is presented below:Entry. New retail forms emerge on the low-price end of the market. These stores offer low-price, usually supported by poor location related to convenience, and few services.Evolution. As the store form becomes more popular, customer demands increase the pressure to offer more services and better location. As the store form incorporates these needs into their product offerings, costs rise.Decline. Continuing increases in costs eventually make the store form vulnerable to low-price, bare-bones store forms. Each generation of new store form entrants modifies the formula somewhat, so that low-margin store forms continue to innovate .Teaching Tip: Many new upscale store forms do not fit into the wheel of retailing schema. For example, Wal-Mart continues to grow by not allowing costs to rise. You may wish to point out to students the descriptive, rather than predictive, nature of the model.13223Low MarginLow PriceLow Status11 = Discount2 = Superstore3 = Warehouse Club4 = Combination Store1234
12 The Future of Retailing New Retail Forms and ShorteningRetail LifecyclesGrowth of Nonstore RetailingIncreasing Intertype CompetitionThe Future of RetailingRise of MegaretailersGrowing Importance ofRetail TechnologyGlobal Expansion of Major RetailersRetail Stores as “Communities”or “Hangouts”
13 What is Wholesaling?All the activities involved in selling goods and services to those buying for resale or business use.Wholesaler - those firms engaged primarily in wholesaling activity.
14 Why are Wholesalers Used? WholesalingThis CTR relates to the material on pWhy are Wholesalers Used?Wholesalers are Often Better at Performing One or More of the Following Channel Functions:WholesalerFunctionsManagementServices & AdviceSelling andPromotingMarketInformationBuying andAssortment BuildingRisk BearingBulk BreakingTransportingFinancingWarehousingWholesalingWholesaling includes all activities involved in selling goods and services to those buying for resale or business use.Wholesaler FunctionsSelling and Promoting. Contacts and small retailer connections help wholesalers reach more buyers than distant manufacturers.Buying and Assortment Building. Wholesalers can select items and build assortments needed by their customers better than manufacturers.Bulk-Breaking. Wholesalers save customers money by buying large quantities and lots and breaking them into smaller lots.Warehousing. Wholesalers hold inventories, reducing inventory costs and risks to suppliers and customers.Transportation. Wholesalers provide quicker transport of orders to customers than do producers.Financing. Wholesalers extend credit.Risk Bearing. Wholesalers take title and absorb risks for loss, damage, or theft.Market Information. Wholesalers provide information to suppliers and customers about competitors, new products, and price developments.Management Services and Advice. Wholesalers provide training to retailers on sales, improved store layouts, displays, and accounting and inventory control procedures.
15 They Don’t Take Title to Wholesaling by Sellers Types of WholesalersBrokers/ AgentsThey Don’t Take Title tothe Goods, and TheyPerform Only a FewFunctions.MerchantWholesalerIndependently OwnedBusiness that TakesTitle to theMerchandiseit Handles.Manufacturers’Sales Branchesand OfficesWholesaling by Sellersor Buyers ThemselvesRather Than ThroughIndependentWholesalers.
16 Product and Service Assortment Retail Store Positioning Wholesaler Marketing DecisionsWholesaler Marketing DecisionsThis CTR relates to the discussion on ppWholesaler MarketingMixWholesaler StrategyProduct and Service AssortmentPricesPromotionPlace (Location)Wholesaler Marketing DecisionsThere are important differences among the marketing decisions made by wholesalers, retailers, and manufacturers, although each element of the marketing system addresses the five key decision areas:Target Market Decision. Like all marketing operations, wholesaling needs focus. Wholesalers may target by size of customer, need for service, or other factors.Product Assortment and Services Decision. Assortment is the product of the wholesaler. Still immediate availability of items made possible through large inventory is giving way to better stocking of faster-moving items. Inventory costs are balanced against the profitability of each line.Price Decision. Traditionally, wholesalers markup products by a fixed percentage. Costs are deducted from this markup, leaving low single digit profits. Volume is the key.Discussion Note: The Sam’s Club membership wholesaler chain aims that pricing to exactly cover costs. Profit is to come from the sale of memberships alone.Promotion Decision. In general, wholesalers are not promotion-minded. But as competition increases and the wholesale market becomes more fragmented, more attention to promotion tools, especially nonpersonal ones, is likely.Place Decision. Traditional place decisions were made on low cost factors, with little investment in facilities. Modern inventory tracking, loading, and routing systems are making place locations more strategic than simply finding large, empty, low-cost buildings.Target MarketRetail Store Positioning
17 Trends in Wholesaling Wholesaling Developments to Consider Must Learn to Compete Effectively OverWider and More Diverse AreasTrends in WholesalingIncreasing Consolidations Will ReduceNumber of WholesalersWholesaling Developments to ConsiderSurviving Wholesalers Will Grow LargerThrough Acquisitions and MergersVertical Integration Will Remain StrongGlobal Expansion