Transcript Retailer Marketing Decisions

Retailing and Wholesaling
Chapter
11
Chapter Outline
 Retailing
 Retailer Marketing Decisions
 Retailing Trends and Developments
 Wholesaling
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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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Retailing
All activities involved in selling
goods or services directly to
final consumers for their
personal, non-business use.
Retailers are businesses whose sales
come primarily from retailing.
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Retailing
 Most retailing is done
by retailers, but
nonstore retailing has
recently grown by
leaps and bounds.
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Retailing
 Non-store retailing includes selling
to final consumers through:
– Direct mail
– Catalogs
– Telephone
– Internet
– TV shopping
– Home and office parties
– Door-to-door sales
– Vending machines
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Types of Retailers
 The different types of retailers can be
classified based on:
– The amount of service they offer.
– The length, breadth and depth of
product lines carried.
– The relative prices charged.
– How they are organized.
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Types of Retailers
 Classification by the amount of service
offered:
– Self-service retailers:
• Serve customers who are willing to perform their own
“locate-compare-select” process to save money.
• Wal-Mart, Supermarkets
– Limited-service retailers:
• Provide more sales assistance, as they carry more shopping
goods, about which customers need more information.
• Sears, Sasa, JC Penney
– Full-service retailers:
• Usually carry more specialty goods for which customers
need or want assistance or advice.
• Assist customers in every phase of the shopping process,
resulting in higher costs that are passed on to the customer
as higher prices.
• Department stores, Specialty stores
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Types of Retailers
 Classification by length, breadth &
depth of their product assortments:
– Specialty stores:
• Carry narrow product lines, with deep
assortments within the product lines (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, breadth &
depth 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 of assortment of
routinely purchased food goods, nonfood items,
and services (e.g., Wal-Mart Supercenter; Best
Buy).
• Category killers are really giant specialty stores
that carry a very deep assortment of a particular
line with knowledgeable staff.
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Types of Retailers
 Classification by relative prices charged:
– 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.
– Factory outlets are
producer-operated stores.
– Warehouse clubs are large,
warehouse-like facilities with
few frills and offer ultra-low
prices.
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Marketing in Action
Wal-Mart’s low-price value proposition and streamlined
cost structure has helped make them the world’s largest
retailer. Sales of toys and pet supplies top those of
category killers.
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Types of Retailers
 Classification by major retail organization
types:
– Corporate chain stores
• Two or more outlets that are commonly owned and
controlled.
• Size allows them to buy in large quantities at lower
prices and gain promotional economies.
– Sears
– Watsons
– Voluntary chain:
• Wholesaler-sponsored group of independent retailers
engaged in group buying and merchandising.
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Types of Retailers
 Classification by major retail organization
types:
– Retailer cooperative:
• Group of independent retailers who band
together to set up a jointly-owned, central
wholesale operation and to conduct joint
merchandising & promotion efforts.
– Franchise organization:
• Contractual association between a franchisor and
franchisees. Based:
– On some unique product or service
– On a method of doing business
– On the trade name, good will, or patent that
the franchisor has developed
• McDonald’s, Pizza Hut, etc.
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Figure 11.1:
Retailer Marketing
Decisions/Strategies
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Retailer Marketing Decisions
 Retail Strategy:
– Segmentation and targeting
– Store differentiation and positioning
 Target market and positioning involves
the definition and profile of the market so
the other retail marketing decisions can be
made.
– Retailers cannot make meaningful decisions
related to the retail marketing mix until they
first define and profile their target market.
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Marketing in Action
By positioning itself
strongly away from WalMart and other
discounters, Whole Foods
Market has made itself
one of the nation’s
fastest-growing and more
profitable food retailers.
Whole Foods Market
focuses on selling highquality natural and
organic foods.
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Retailer Marketing Decisions
 Retail 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.
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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 is growing in popularity.
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Marketing in Action
,
The Cabella’s “experience” has
made it a tourist destination.
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Outdoor-products retailer
Cabela’s provides more
than deep product
assortment and good
customer service. The
Fort Worth Texas store
offers an African animal
diorama, trophy deer
museum, three walkthrough aquariums, and
conservation mountain,
which boasts museum
quality taxidermy
displays.
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Marketing in Action
,
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).
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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
 Price decisions:
 Everyday low prices (EDLP) involves
charging a constant, everyday low price
with few sales or discounts.
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Retailer Marketing Decisions
 Price decisions:
 High-low pricing involves charging higher
prices on an everyday basis, coupled with
frequent sales and other price promotions
to increase store traffic, clear out unsold
merchandise, create a low price images, or
attract customers who will buy other
goods at full price.
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Marketing in Action
,
Bijan’s boutique on Rodeo Drive in Beverly Hills sells
$375 silk ties and $19,000 ostrich-skin vests. Its
“appointment only” policy makes wealthy, highcomfortable clients comfortable with these prices.
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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.
• Accessibility
• Consistent with positioning
– 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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Place Decisions
 Central business districts are
located in cities and include
department and specialty stores,
banks, and movie theaters.
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Place Decisions
A shopping
center is a group
of retail
businesses built
on a site
that is planned,
developed,
owned,
and managed as
a unit
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Marketing in Action
,
Today’s shopping centers are more about creating places
to be rather than just places to buy. The trend is
towards large power centers, smaller lifestyle centers, or
hybrids of each. Visit The Wharf’s website to see an
example.
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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.
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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Retailing Trends and Developments
Trend #1: New Retail Forms and Shortening
Retail Life Cycles
The wheel-of-retailing concept states that
many types of retailing forms begin as lowmargin, low-price, low-status operations and
challenge established retailers.
As they succeed, they upgrade their facilities
and offer more services, increasing their
costs and forcing them to increase prices,
eventually evolving to become the retailers
they replaced.
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Retailing Trends and Developments
Trend #2: A slowed economy and tighter
consumer spending
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Retailing Trends and Developments
Growth of nonstore retailing
includes:
- Mail order
- Television
- Phone
- Online
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Retailing Trends and Developments
Trend #4: Retail Convergence
Produ
cts
Consum
ers
Prices
Retail
Converge
nce
Retaile
rs
Retail convergence involves
the merging of consumers,
producers, prices, and retailers
- creates greater competition
for retailers and greater
difficulty differentiating
offerings.
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Retailing Trends and Developments
Trend #5: The Rise of Megaretailers
The rise of
megaretailers involves
the rise of mass
merchandisers and
specialty superstores,
the formation of vertical
marketing systems, and
a rash of retail mergers
and acquisitions.
- Superior
information
systems
- Buying power
- Large selection
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Retailing Trends and Developments
Trend #6: Growing importance of retail
technology
Retail technology
includes video-casts,
inventory control,
electronic ordering,
transfer of information,
scanning, online
transaction processing,
improved merchandise
handling systems, and the
ability to connect with
customers.
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Retailing Trends and Developments
Trend #7: Global expansion of major
retailers
Retailers are
expanding to escape
mature and saturated
home markets
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Retailing Trends and Developments
Trend #8: Retail stores as communities or
“hangouts”
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Marketing in Action
,
The Internet has spawned a whole new breed of
shoppers – 92% of shoppers have more confidence in
information they find online. As a result, many retailers
offer users the chance to review or rate products.
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Marketing in Action
Bloom supermarkets allow
customers to use handheld
scanners to track their bill as
they shop, then download the
scanner data at the self-service
,pay station.
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Marketing in Action
,
Many retailers are now building virtual communities
online. Scissors and crafting supplies maker Fiskars’
online community has more than 4,000 members!
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Fuel for Thought
Many retail stores are becoming
“communities” or “hangouts” either in the
brick-and-mortar or virtual worlds.
What can retailers do to make their brickand-mortar stores “community friendly”?
Are there circumstances in which it would be
undesirable to encourage patrons to “hangout”? Explain.
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Wholesaling
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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Marketing in Action
,
Many of the nation’s largest
and most important
wholesalers – like Grainger –
are largely unknown to final
consumers. Grainger offers
more than 900,000
maintenance, repair, and
operating (MRO) items to
over 1.8 million customers.
Grainger’s value proposition
is simple: to make it easier
and less costly for buyers to
purchase MRO items.
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Importance of Wholesalers
Functions performed by wholesalers:
Selling and
promoting
Buying and
assortment
building
Bulk breaking
Warehousing
Transportation
Financing
Risk bearing
Market
information
Management
services and
advice
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Wholesaling
 Selling and promoting involves the
wholesaler’s sales force helping the
manufacturer reach many smaller
customers at lower cost.
 Buying and assortment building
involves the selection of items and
building of assortments needed by
their customers, saving the customers
work.
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Wholesaling
 Bulk breaking involves the wholesaler
buying in larger quantity and breaking
into smaller lots for its customers.
 Warehousing involves the wholesaler
holding inventory, reducing its
customers’ inventory cost and risk.
 Transportation involves the
wholesaler providing quick delivery
due to its proximity
to the buyer.
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Wholesaling
 Financing involves the wholesaler
providing credit and financing
suppliers by ordering earlier and
paying on time.
 Risk bearing involves the wholesaler
absorbing risk by taking title and
bearing the cost of theft, damage,
spoilage, and obsolescence.
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Wholesaling
 Market information involves the
wholesaler providing information to
suppliers and customers about
competitors, new products, and price
developments.
 Management services and advice
involves wholesalers helping retailers
train their sales clerks, improve store
layouts, and set up accounting and
inventory control systems.
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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
– who provide a full set of services
• Limited-service wholesalers
– who provided few services and specialized
functions.
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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
and assist in negotiations
 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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Figure 11.2:
Wholesaler Marketing
Decisions/Strategies
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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.
 Weeding 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 –
perhaps due to slower growth in domestic
markets
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Marketing in Action
,
Pharmaceutical wholesaler McKesson helps its retail
pharmacist customers to be more efficient by offering a
wide range of online resources.
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Reviewing 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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11 - 58