1. Prentice Hall, Copyright 2009 Retailing and Wholesaling Chapter 11 Next Exit

2. 11-2 2 Prentice Hall, Copyright 2009 Rest Stop: Previewing the Concepts 1. Explain the roles of retailers and wholesalers in the distribution channel. 2. Describe the major types of retailers and give examples of each. 3. Describe the major types of wholesalers and give examples of each. 4. Explain the marketing decisions facing retailers and wholesalers.

3. 11-3Prentice Hall, Copyright 2009 Costco Background Costco warehouse club outsells Wal-Mart’s Sam’s Club by 50% despite having 50 fewer stores. Sales have surged 55%, profits 57%, over the last 4 years. Similar to Sam’s Club, Costco offers limited selection of national and private-label brands at low prices to members. Costs are kept low; Costco refuses to mark up any item more than 14%. Operating margins average only 2.8%. Costco – Beating Wal-Mart at its Own Game Case Study Why Costco is Succeeding Costco is a “theatre of retail that creates buying urgency and excitement for customers.” Costco carries a changing assortment of high quality goods and luxury items such as Prada bags and Callaway golf clubs. Stores are located in more affluent areas than are Sam’s Clubs, and draw higher income customers. The Kirkland signature store brand provides a quality offering for a wide range of goods.

4. 11-4 4 Prentice Hall, Copyright 2009 Retailing Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal, non-business use.

5. 11-5Prentice Hall, Copyright 2009 Retailing  Most retailing is done by retailers, businesses, whose revenues come primarily from retailing.  Retailers generate in excess of $4.3 trillion in sales annually.  Nonstore retailing has recently grown by leaps and bounds.

6. 11-6Prentice Hall, Copyright 2009 Types of Retailers  The different types of retailers can be classified based on: –The amount of service they offer. –The breadth and depth of product lines. –The relative prices charged. –How they are organized.

7. 11-7Prentice Hall, Copyright 2009 Types of Retailers  Classification by the amount of service: –Self-service retailers serve customers who are willing to perform their own “locate- compare-select” process to save money. –Limited-service retailers provide more sales assistance because they carry more shopping goods about which customers need information. –Full-service retailers usually carry more specialty goods for which customers need or want assistance or advice.

8. 11-8Prentice Hall, Copyright 2009 Types of Retailers  Specialty stores  Department stores  Supermarkets  Convenience stores  Superstores  Service retailers Retail classifications by product line:

9. 11-9 Prentice Hall, Copyright 2009 Upscale Supermarkets Many supermarkets are moving upscale. Safeway is converting to “lifestyle” stores, supported by a big- budget “ingredients for life” marketing campaign. Marketing in Action

10. 11-10Prentice Hall, Copyright 2009 Types of Retailers  Relative prices classification: –Discount stores –Off-price retailers: Independent off-price retailers Factory outlets: –Factory outlet malls –Value-retail centers Warehouse clubs

11. 11-11 Prentice Hall, Copyright 2009 Wal-Mart Rules the Discounters Wal-Mart’s low-price value proposition has helped make them the world’s largest retailer. Sales of toys and pet supplies top those of category killers. Marketing in Action

12. 11-12Prentice Hall, Copyright 2009 Types of Retailers  Organizational classification: –Corporate chain stores –Voluntary chain –Retailer cooperative –Franchise –Merchandising conglomerates

13. Prentice Hall, Copyright 200911-13 Figure 11.1 Retailer Marketing Strategy

14. 11-14Prentice Hall, Copyright 2009 Retailer Marketing Decisions  Retailer Strategy: –Segmentation and targeting –Store differentiation and positioning –Retail marketing mix Retailers cannot make meaningful decisions related to the retail marketing mix until they first define and profile their target market.

15. 11-15 Prentice Hall, Copyright 2009 Positioning Whole Foods Market Whole Foods Market targets a select group of upscale customers and offers them “organic, natural, and gourmet foods, all swaddled in Earth Day politics.” Marketing in Action

16. 11-16Prentice Hall, Copyright 2009 Retailer Marketing Decisions  Retailer marketing mix: –Product and service assortment –Retail prices –Promotion –Distribution (location)  The retail strategy and retail marketing mix must combine to create value for targeted retail customers.

17. 11-17Prentice Hall, Copyright 2009  Retail marketing mix: –Product assortment should differentiate the retailer while matching target shoppers’ expectations. –Services mix can help differentiate one retailer from another (e.g., Home Depot’s “How-to” classes for do-it- yourselfers). Retailer Marketing Decisions

18. 11-18Prentice Hall, Copyright 2009  Retail marketing mix: –Store atmosphere is important as: The physical layout can help or hinder shopping Experiential retailing helps sell goods Unusual, exciting shopping environments are becoming more common Retailer Marketing Decisions

19. 11-19 Prentice Hall, Copyright 2009 Positioning Whole Foods Market Successful retailers orchestrate every aspect of the store atmosphere and experience. Sony Style carefully controls the music, lighting, colors, and even the smells (vanilla and mandarin orange). Marketing in Action

20. 11-20Prentice Hall, Copyright 2009 Retailer Marketing Decisions  Price decisions: –The price policy must fit with the target market and positioning, the product and service assortment, and the competition.

21. 11-21Prentice Hall, Copyright 2009 Retailer Marketing Decisions  Promotion decisions: –Retailers can use any or all of the promotion tools— advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers.

22. 11-22Prentice Hall, Copyright 2009 Retailer Marketing Decisions  Distribution decisions: –Location is the key to success. –Retailers can locate in: Central business districts Various types of shopping centers Strip malls Power centers Lifestyle centers

23. 11-23Prentice Hall, Copyright 2009 The Future of Retailing 1.New retail forms and shortening retail life cycles 2.Nonstore retailing growth 3.Retail convergence 4.Rise of the megaretailers 5.Growing importance of retail technology 6.Global expansion of major retailers 7.Retail stores as “communities” or “hangouts”

24. 11-24 Prentice Hall, Copyright 2009 Lifestyle Centers The current trend in retailing is toward either large “power centers” (huge unenclosed shopping malls) or “lifestyle centers” (smaller malls with upscale stores and nonretail activities such as dining and a movie theatre in affluent areas), or a hybrid of both. Marketing in Action

25. Fuel for Thought 11-25 Prentice Hall, Copyright 2009 Many retail stores are becoming “communities” or “hangouts” either in the brick-and-mortar or virtual worlds. What can retailers do to make their brick-and-mortar stores “community friendly”? Are there circumstances in which it would be undesirable to encourage patrons to “hang-out”? Explain.

26. 11-26 26 Prentice Hall, Copyright 2009 Wholesaling Includes all activities involved in selling goods and services to those buying for resale or business use.

27. 11-27Prentice Hall, Copyright 2009 Wholesaling  Wholesalers add value for producers by performing one or more channel functions.

28. 11-28Prentice Hall, Copyright 2009 Wholesaling  Financing  Risk bearing  Market information  Management services and advice  Selling and promoting  Buying and assortment building  Bulk-breaking  Warehousing  Transportation Functions performed by wholesalers:

29. 11-29Prentice Hall, Copyright 2009 Types of Wholesalers  Merchant wholesalers: –Largest group of wholesalers –Account for 50% of wholesaling –Two broad categories: Full-service wholesalers Limited-service wholesalers

30. 11-30Prentice Hall, Copyright 2009 Types of Wholesalers  Full-service wholesalers: –Wholesale merchants –Industrial distributors  Limited-service wholesalers: –Cash-and-carry wholesalers –Truck wholesalers –Drop shippers –Producer’s cooperatives –Mail-order wholesalers

31. 11-31Prentice Hall, Copyright 2009 Types of Wholesalers  Brokers and agents: –Do not take title to goods –Perform only a few functions –Specialize by product line or customer type

32. 11-32Prentice Hall, Copyright 2009 Types of Wholesalers  Brokers bring buyers and sellers together.  Agents represent buyers on a more permanent basis. –Manufacturers’ agents –Selling agents –Purchasing agents –Commission merchants.

33. 11-33Prentice Hall, Copyright 2009 Types of Wholesalers  Manufacturers’ sales branches and offices: –Involves wholesaling by sellers or buyers themselves rather than through independent wholesalers.

34. Prentice Hall, Copyright 200911-34 Figure 11.2 Wholesaler Marketing Strategy

35. 11-35Prentice Hall, Copyright 2009 Trends in Wholesaling  Fierce resistance to price increases.  Winnowing out of suppliers who are not adding value based on cost and quality.  Distinction between large retailers and wholesalers continues to blur.  Wholesalers will continue to increase the services provided to retailers.  Wholesalers are now going global.

36. 11-36 36 Prentice Hall, Copyright 2009 Rest Stop: Reviewing the Concepts 1. Explain the roles of retailers and wholesalers in the distribution channel. 2. Describe the major types of retailers and give examples of each. 3. Describe the major types of wholesalers and give examples of each. 4. Explain the marketing decisions facing retailers and wholesalers.

37. 11-37 37 Prentice Hall, Copyright 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall