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Retailing and Wholesaling

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Presentation on theme: "Retailing and Wholesaling"— Presentation transcript:

1 Retailing and Wholesaling
Chapter Retailing and Wholesaling

2 Chapter Questions What major types of marketing intermediaries occupy this sector? What marketing decisions do these marketing intermediaries make? What are the major trends with marketing intermediaries?

3 Starbucks Hear Music Coffeehouse

4 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, Walmart Nonstore retailers such as the mail, telephone, and Internet.

5 Classification of Retail Stores
Amount of Service Self-Service, Limited-Service and Full-Service Retailers Classification of Retail Stores This CTR relates to the material on pp Classification of Retail Stores Product Line Length and Breadth of the Product Assortment Relative Prices Pricing Structure that is Used by the Retailer Retail Organizations Independent, Corporate, or Contractual Ownership Organization Store Retailing Classifications Retailing 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).

6 Classification By Product Line
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 Superstores Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Category Killers Giant Specialty Store that Carries a Very Deep Assortment of a Particular Line Hypermarkets Huge Superstores

7 Department Store Model: Strong Retail Brand Approach

8 Department Store Model: The Showcase Store

9 Classification By Retail Organization
This CTR relates to the discussion on pp Merchandising Conglomerates Corporate Chains Control of Outlets Major 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. Franchise Organizations Voluntary Chains Retail Organizations Retailer Cooperatives

10 III- Corporate Retail Organizations
Features of corporate retailing: Greater purchasing power Achieve economies of scale Wider brand recognition Better trained employees

11 III- Corporate Retail Organizations Major Types:
Corporate chain store Two or more outlets commonly owned and controlled, selling similar lines of merchandise, buy in large volumes at lower price, highly skilled employees. Voluntary chain. - It is wholesaler-sponsored group of independent retailers who have bulk buying and have common merchandise. Retailer cooperative. Independent retailers who set up a central buying organization and conduct joint promotion efforts

12 Franchise organization
Consumer cooperative A retail firm owned by its customers who elect a group to manage it and receive patronage dividends. Franchise organization Contractual association between franchiser (manufacturers, wholesalers, service organizations) and franchisee who are authorized to use the brand name. McDonalds …. Merchandize conglomerate Several diversified retailing lines under central ownership with integration in management and distribution.

13 Characteristics of Direct Marketing
This CTR relates to the material on p. 398. Characteristics of Direct Marketing Privacy Targeted Individuals Response Measurement Customized Offer Key Characteristics of Direct Marketing Direct Marketing Benefits 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. Testing Immediate Orders Higher Response Continuous Relationship

14 Types of NonStore Retailing
This CTR refers to the discussion on pp Direct Marketing Nonstore Retailing Accounts for More Than 14% of All Consumer Purchases, and May Account for 33% of All Sales by 2000. Direct Selling Automatic Vending Catalogs & Direct Mail Direct Marketing Direct 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 Shows Online Shopping Home & Office Parties

15 Retailer Marketing Decisions
This CTR relates to the material on pp Retailer Marketing Decisions Retailer Marketing Mix Retailer Strategy Product and Service Assortment Prices Promotion Place (Location) Retailer Marketing Decisions Target 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 Market Retail Store Positioning

16 Key Tool of Nonprice Competition for Setting One Store Apart From
Product Assortment Decisions Width and Depth of Assortment Quality of Products Product Differentiation Strategies Click to add title Retailer’s Product Assortment and Services Decisions Services Mix Key Tool of Nonprice Competition for Setting One Store Apart From Another. Store’s Atmosphere Physical Layout “Feel” That Suits the Target Market and Moves Customers to Buy

17 Postpurchase services
Retailer Services Mix Prepurchase services Postpurchase services Ancillary services

18 Product & Services Assortment
Click to add title Retailer’s Price, Promotion, and Place Decisions Price Decisions Target Market Product & Services Assortment Competition Promotion Decisions Using Advertising, Personal Selling, Sales Promotion and Public Relations to Reach Customers. Place Decisions Shopping Centers, Central Business Districts, Power Centers, or Outlet Malls. Location!

19 Location Decision General business districts Regional shopping centers
Community shopping centers Strip malls Location within a larger store

20 Indicators of Sales Effectiveness
Number of people passing by % who enter store % of those who buy Average amount spent per sale

21 Wall Mart’s Factors of Success:
Listen to the customers. Treat employees as partners. Big sign reading (Satisfaction guaranteed), (we sell for less). Customers often welcome by greeter Low price and speed stock replenishment. Expanded their stories outside of US

22 The Future of Retailing
New Retail Forms and Shortening Retail Lifecycles Growth of Nonstore Retailing Increasing Intertype Competition The Future of Retailing Rise of Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers

23 Trends in Retailing New retail forms has been emerged.
New retailers are facing shorter life span, they are rapidly copied and lose novelty. It is familiar in our areas. Growth of non store retailing. Competition is increasing between different types of stores, like Discount stores, Catalog showrooms, Department stores. All are competing the same customers. All retailers now moving to one of 2 poles, either mass merchandiser, or as specialty retailer. Super power retailers emerging.

24 Trends in Retailing cont.
Department stores - one stop shopping convenience. Gradually they gave up to Malls where customers can find every thing. Technology became critical, Retailers using computers to manage better Inventory, Ordering, etc.. Retailers with unique formats and strong positioning are moving to other countries, Like McDonalds. 18% of US retailers moved out, 40% of Europeans, and 31% of Far East.

25 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.

26 Why are Wholesalers Used?
Wholesaling This CTR relates to the material on p Why are Wholesalers Used? Wholesalers are Often Better at Performing One or More of the Following Channel Functions: Wholesaler Functions Management Services & Advice Selling and Promoting Market Information Buying and Assortment Building Risk Bearing Bulk Breaking Transporting Financing Warehousing Wholesaling Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use. Wholesaler Functions Selling 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.

27 They Don’t Take Title to Wholesaling by Sellers
Types of Wholesalers Brokers/ Agents They Don’t Take Title to the Goods, and They Perform Only a Few Functions. Merchant Wholesaler Independently Owned Business that Takes Title to the Merchandise it Handles. Manufacturers’ Sales Branches and Offices Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

28 Product and Service Assortment Retail Store Positioning
Wholesaler Marketing Decisions Wholesaler Marketing Decisions This CTR relates to the discussion on pp Wholesaler Marketing Mix Wholesaler Strategy Product and Service Assortment Prices Promotion Place (Location) Wholesaler Marketing Decisions There 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 Market Retail Store Positioning

29 Trends in Wholesaling Wholesaling Developments to Consider
Must Learn to Compete Effectively Over Wider and More Diverse Areas Trends in Wholesaling Increasing Consolidations Will Reduce Number of Wholesalers Wholesaling Developments to Consider Surviving Wholesalers Will Grow Larger Through Acquisitions and Mergers Vertical Integration Will Remain Strong Global Expansion

30 Market logistics It involves, Planning, Implementing, and
controlling the physical flow of materials and final goods till from points of origin to points of use. * Market logistics starts from the point of sales forecasting which planning for other activities depend on such as scheduling distribution, production and inventory levels.

31 Market-logistics objectives
Getting the right goods to the right places at the right time for the least cost. Ex. Rail shipments or air shipments? Cheaper containers to minimize cost? Low Inventories, will lead to increase stakeouts, back orders, more paper work, special production runs will lead to high-cost fast freight shipments.

32 Each market system will lead to the following costs.
M = T+FW+VW+S 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 (include inventory). S = Total cost of lost sales due to average delivery delay under proposed system.

33 Market Logistic Decisions
Four major decision must be made: Order Processing “system of ordering” Warehousing ”where should stocks be located” Inventory “how much stock should be held” Transportation “how should goods be shipped”

34 Organizational Lessons about Marketing Logistics:
Market logistics decisions must be based on profit maximizing rather than cost consideration Electronic links among all parties should be established Logistics goals should match or exceed competitors’ service standards.

35 Market Logistics Decisions
How should orders be handled? Where should stock be located? How much stock should be held? How should goods be shipped?

36 Transportation Factors
Speed Frequency Dependability Capability Availability Traceability Cost

37 Containerization

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