1. Wholesaling, Retailing, and Physical Distribution
Chapter Fourteen
Wholesaling, Retailing, and Physical Distribution

2. Learning Objectives
Identify the various channels of distribution that are used for consumer and industrial products.
Explain the concept of market coverage.
Understand how supply-chain management facilitates partnering among channel members.
Describe what a vertical marketing system is and identify the types of vertical marketing systems.
Discuss the need for wholesalers and describe the services they provide to retailers and manufacturers.
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3. Learning Objectives (cont’d)
Identify and describe the major types of wholesalers.
Distinguish among the major types of retailers.
Identify the categories of shopping centers and the factors that determine how shopping centers are classified.
Explain the five most important physical distribution activities.
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4. Chapter 14 Outline Channels of Distribution
Channels for Consumer Products
Channels for Business Products
Market Coverage
Partnering Through Supply-Chain Management
Vertical Marketing Systems
Marketing Intermediaries: Wholesalers
Justifications for Marketing Intermediaries
Wholesalers’ Services to Retailers
Wholesalers’ Services to Manufacturers
Types of Wholesalers
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5. Chapter 14 Outline (cont’d)
Marketing Intermediaries: Retailers
Classes of In-Store Retailers
Kinds of Nonstore Retailing
Planned Shopping Centers
Lifestyle Shopping Centers
Neighborhood Shopping Centers
Community Shopping Centers
Regional Shopping Centers
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6. Chapter 14 Outline (cont’d)
Physical Distribution
Inventory Management
Order Processing
Warehousing
Materials Handling
Transportation
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7. Channels of Distribution
Channel of distribution (marketing channel)
Middleman (marketing intermediary)
A marketing organization that links a producer and user within a marketing channel
Merchant middleman
Functional middleman
Retailer
Wholesaler
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8. Channels for Consumer Products
Producer to consumer (direct channel)
No intermediaries
Used by all services and by a few consumer goods
Producers can control quality and price, do not have to pay for intermediaries, and can be close to their customers
Examples: Dell Computer, Mary Kay Cosmetics
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9. Channels for Consumer Products (cont’d)
Producer to retailer to consumer
Producers sell directly to retailers when retailers (Wal-Mart) can buy in large quantities
Most often used for bulky products for which additional handling would increase selling costs, and for perishable or high-fashion products that must reach consumers quickly
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10. Channels for Consumer Products (cont’d)
Producer to wholesaler to retailer to consumer
The traditional channel
Used when a producer’s products are carried by so many retailers that the producer cannot deal with them all
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11. Channels for Consumer Products (cont’d)
Producer to agent to wholesaler to retailer to consumer
Agent
Often used for inexpensive, frequently purchased items, for seasonal products, and by producers that do not have their own sales forces
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12. Channels for Consumer Products (cont’d)
A manufacturer may use multiple channels
To reach different market segments
To increase sales or capture a larger market share
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13. Channels for Business Products
Producer to business user
Usually used for heavy machinery, airplanes, major equipment
Allows the producer to provide expert and timely services to customers
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14. Channels for Business Products (cont’d)
Producer to agent middleman to business user
Usually used for operating supplies, accessory equipment, small tools, standardized parts
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15. Market Coverage Intensity of market coverage Intensive distribution
Selective distribution
Exclusive distribution
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16. Partnering Through Supply Chain Management
Long-term partnership among channel members
Category management
Technology
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17. Vertical Marketing Systems
Vertical channel integration
The combining of two or more stages of a distribution channel under a single firm’s management
Vertical marketing system (VMS)
A centrally managed distribution channel resulting from vertical channel integration
Administered
Contractual
Corporate
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18. Marketing Intermediaries: Wholesalers
Justifications for marketing intermediaries
Intermediaries perform essential marketing services
Manufacturers would be burdened with additional record keeping and maintaining contact with numerous retailers
Costs for distribution would not decrease and could possibly increase due to the marketing inefficiencies of producers
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19. Wholesalers’ Services to Retailers
Buy in large quantities and then sell in smaller quantities
Deliver goods
Stock in one place a variety of goods
Promote products to retailers
Provide market information for both producers and retailers
Provide financial aid in the form of inventory management, loans, delayed billing
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20. Wholesalers’ Services to Manufacturers
Provide instant sales forces to manufacturers
Reduce manufacturers’ inventory costs by purchasing finished goods in sizable quantities
Assume the credit risks associated with selling to retailers
Furnish market information gleaned from the market and customers to the manufacturers
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21. Types of Wholesalers Merchant wholesalers
Operate in one or more warehouses where they receive, take title to, and store goods
These wholesalers are sometimes called distributors or jobbers
Full-service wholesalers
General merchandise wholesaler
Limited-line wholesaler
Specialty-line wholesaler
Limited-service wholesalers
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22. Types of Wholesalers (cont’d)
Commission merchants, agents, and brokers
Functional middlemen that do not take title to products
Perform some marketing activities
Paid a commission (percentage of sales price)
Commission merchant
Agent
Broker
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23. Types of Wholesalers (cont’d)
Manufacturer’s sales branch
Merchant wholesaler owned by a manufacturer
Carries inventory, extends credit, delivers goods, helps in promoting products
Customers are retailers, other wholesalers, and industrial purchasers
Manufacturer’s sales office
Sales agent owned by a manufacturer
Sells goods manufactured by its own firm and also others that complement its own product line
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24. Marketing Intermediaries: Retailers
Retailers: The final link between producers and consumers
Approx. 2.6 million retail firms in the U.S.
90% have sales of less than $1 million
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25. Classes of In-Store Retailers
Independent retailer
Chain retailer
Department store
Discount store
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26. Classes of In-Store Retailers (cont’d)
Catalog showroom
Warehouse showroom
Convenience store
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27. Classes of In-Store Retailers (cont’d)
Supermarket
Superstore
Warehouse club
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28. Classes of In-Store Retailers (cont’d)
Traditional specialty store
Off-price retailer
Category killer
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29. Kinds of Nonstore Retailing
A type of retailing whereby consumers purchase products without visiting a store
Direct selling
Direct marketing
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30. Kinds of Nonstore Retailing (cont’d)
Catalog marketing
Direct-response marketing
Telemarketing
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31. Kinds of Nonstore Retailing (cont’d)
Television home shopping
Online retailing
Automatic vending
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32. Planned Shopping Centers
A self-contained retail facility constructed by independent owners and consisting of various stores
Lifestyle shopping center
Neighborhood shopping center
Community shopping center
Regional shopping center
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33. Physical Distribution
All those activities concerned with the efficient movement of products from the producer to the ultimate user
Inventory management
The process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costs
Holding costs
Stock-out
Order processing
Activities involved in receiving and filling customers’ purchase orders
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34. Physical Distribution
Warehousing
The set of activities involved in receiving and storing goods and preparing them for reshipment
Receiving goods
Identifying goods
Sorting goods
Dispatching goods to storage
Holding goods
Recalling, picking, and assembling goods
Dispatching shipments
Types of warehouses
Private warehouses
Public warehouses
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35. Physical Distribution (cont’d)
Materials handling
Transportation
The shipment of products to customers
Carrier
Common carriers
Contract
Private carriers
Freight forwarders
Railroads
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