Transcript Chapter 11

Retailing
and Wholesaling
Chapter 11
Rest Stop: Previewing the Concepts
1. Explain the roles of retailers in the
2.
3.
4.
distribution channel and describe the
major types of retailers.
Describe the major retailer marketing
decisions.
Discuss the major trends and
developments in retailing.
Describe the major types of wholesalers
and their marketing decisions.
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First Stop
Costco Beats Wal-Mart at its Own Game
•
•
Costco Background
Performance: Costco
warehouse club outsells
Wal-Mart’s Sam’s Club by
60% despite having 222
fewer stores. Sales have
surged 66%, profits 45%,
over the last 4 years.
Product Offerings: Costco
offers a limited selection of
national and private-label
brands at very low prices to
members. Costs are kept
low; no item is marked-up
more than 14%. Operating
margins average only 2.8%.
•
•
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Why Costco Succeeds
Value Proposition: Costco
carries an ever-changing
assortment of high quality
goods and luxury “treasure
items” that Sam’s Club does
not. These one-time offerings
create a sense of shopping
urgency among buyers.
Enhanced Image: Costco has
made discount shopping
fashionable and draws higher
income buyers. The Kirkland
Signature store brand provides
a quality offering for a wide
range of goods.
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Retailing
• Retailing:
 All
activities involved in selling goods or
services directly to final consumers for their
personal, nonbusiness use.
• Most retailing is done by retailers, but
nonstore retailing has recently grown by
leaps and bounds.
 Nonstore
retailing includes sales made via the
internet, direct mail, catalogs, telephone, and
other direct sales methods.
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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.
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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 as they carry more
shopping goods about which details are needed.
 Full-service
retailers:
• Usually carry more specialty goods for which
customers need or want assistance or advice.
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Types of Retailers
• Classification by length and breadth of
their product assortments:
 Specialty
stores:
• Feature narrow product lines, with deep
assortments (e.g., Radio Shack).
 Department
stores:
• Offer a wide variety of product lines of clothing,
home furnishings, household goods (e.g., Macy’s).
 Supermarkets:
• Usually carry a relatively large variety of low-cost,
low-margin groceries and consumables (e.g.,
Kroger, Safeway).
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Types of Retailers
• Classification by length and breadth of
their product assortments:
 Convenience
stores:
• Carry a limited line of high turnover convenience
goods (e.g., Circle K, 7-Eleven).
 Superstores:
• Much larger than regular supermarkets,
superstores offer a large assortment of routinely
purchased food goods, nonfood items, and
services (e.g., Wal-Mart Supercenter, Best Buy).
• Category killers are really giant specialty stores.
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Types of Retailers
• Relative prices classification:
 Discount
stores:
• Sell standard merchandise at lower prices and
margins, in return for higher volume.
 Off-price
retailers:
• Buy merchandise at less-than-regular wholesale
prices which are sold at less than retail. Goods
include overruns, irregulars, and leftovers.
• Includes independent off-price retailers, factory
outlets and warehouse/wholesale clubs.
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Types of Retailers
• Major types of retail organizations
include:
 Corporate
chain stores:
• Two or more outlets that are commonly
owned and controlled.
 Voluntary
chain:
• Wholesaler-sponsored group of
independent retailers engaged in group
buying and merchandising.
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Types of Retailers
• Major types of retail organizations
include:
 Retailer
cooperative:
• Group of independent retailers who set up
a central buying organization and conduct
joint promotion efforts.
 Franchise
organization:
• Contractual association between a
franchisor and franchisees.
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Retailer Marketing Decisions
• Major marketing decisions:
 Segmentation
and targeting.
 Store differentiation and positioning.
 Retail marketing mix.
• Marketing decisions should create
value for targeted retail customers.
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Retailer Marketing Decisions
• Retail strategy:
 Segmentation
and targeting.
 Store differentiation and positioning.
• Retailers cannot make meaningful
decisions related to the retail marketing
mix until they first define and profile their
target market and then decide how they
will differentiate and position themselves in
these markets.
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Retailer Marketing Decisions
• Retailer marketing mix:
 Product
and service assortment
 Retail prices
 Promotion
 Distribution (location)
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Retailer Marketing Decisions
• 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).
 Store atmosphere is important as a unique
store experience can move customers to buy.
• Experiential retailing.
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Retailer Marketing Decisions
• Price decisions:
 The
price policy must fit with the target
market and positioning, the product and
service assortment, and the competition.
• Price promotions vs. EDLP
• “High-low” pricing
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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.
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Retailer Marketing Decisions
• Place (distribution) decisions:
 Location
is the key to success.
 Retailers can locate in:
• Central business districts.
• Regional shopping centers.
• Community shopping centers.
• Strip malls (neighborhood shopping center).
• Power centers.
• Lifestyle centers.
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Retail Trends & Developments
1.
2.
3.
4.
New retail forms
and shortening
retail life cycles.
Slowed economy
and tightened
consumer
spending.
Growth of
nonstore retailing.
Retail
convergence.
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5. Rise of the
megaretailers.
6. Growing
importance of
retail technology.
7. Global expansion
of major retailers.
8. Retail stores as
“communities” or
“hangouts.”
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Wholesaling
• Wholesaling:
 Includes
all activities involved in selling
goods and services to those buying for
resale or business use.
• Wholesalers add value for producers
by performing one or more channel
functions.
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Wholesaling
Functions performed by wholesalers:
• Selling and promoting
• Buying and assortment
•
•
•
building
Bulk-breaking
Warehousing
Transportation
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• Financing
• Risk bearing
• Market
•
information
Management
services and
advice
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Types of Wholesalers
• Merchant Wholesaler: an independently
owned wholesaler business that takes title
to the merchandise it handles.
 Largest
group of wholesalers.
 Account for 50% of wholesaling.
 Two broad categories:
• Full-service wholesalers.
• Limited-service wholesalers.
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Types of Wholesalers
• Brokers and agents:
 Do
not take title to goods.
 Perform only a few functions.
 Specialize by product line or customer type.
• Brokers bring buyers and sellers together.
• Agents represent buyers on a more
permanent basis.
 Manufacturers’
agents are the most common
type of agent wholesaler.
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Types of Wholesalers
• Manufacturers’ sales branches
and offices:
 Involves
wholesaling by sellers or
buyers themselves rather than through
independent wholesalers.
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Wholesaler Marketing Decisions
• Wholesaler strategy:
 Segmentation,
targeting, differentiation,
and positioning.
• Wholesaler marketing mix:
 Product
assortment and services.
 Price.
 Promotion.
 Distribution
(location).
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Trends in Wholesaling
• Need for ever greater efficiency.
• Demands for lower prices.
• 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.
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Rest Stop: Reviewing the Concepts
1. Explain the roles of retailers in the
distribution channel and describe the
major types of retailers.
2. Describe the major retailer marketing
decisions.
3. Discuss the major trends and
developments in retailing.
4. Describe the major types of wholesalers
and their marketing decisions.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
11 - 27