13 -1 Chapter Retailing and Wholesaling Copyright 1999

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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? Copyright 1999 Prentice Hall 13 -2

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. Copyright 1999 Prentice Hall 13 -4

Classification of Retail Stores Amount of Service Self-Service, Limited-Service and Full-Service Retailers 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 Copyright 1999 Prentice Hall 13 -5

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 Copyright 1999 Prentice Hall 13 -6

Classification By Retail Organization Merchandising Conglomerates Franchise Organizations 13 -9 Corporate Chains Retail Organizations Retailer Cooperatives Copyright 1999 Prentice Hall Voluntary Chains

III- Corporate Retail Organizations Features of corporate retailing: • Greater purchasing power • Achieve economies of scale • Wider brand recognition • Better trained employees Copyright 1999 Prentice Hall 13 -10

III- Corporate Retail Organizations Major Types: 13 -11 • 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 Copyright 1999 Prentice Hall

13 -12 • 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. Mc. Donalds …. • Merchandize conglomerate • Several diversified retailing lines under central ownership with integration in management and distribution. Copyright 1999 Prentice Hall

Characteristics of Direct Marketing Privacy Response Measurement Testing Targeted Individuals Key Characteristics of Direct Marketing Higher Response Copyright 1999 Prentice Hall Customized Offer Immediate Orders Continuous Relationship 13 -13

Types of Non. Store Retailing 13 -14 Nonstore Retailing Accounts for More Than 14% of All Consumer Purchases, and May Account for 33% of All Sales by 2000. Direct Marketing Direct Selling Automatic Vending Catalogs & Direct Mail TV Shopping Shows Online Shopping Copyright 1999 Prentice Hall Home & Office Parties

Retailer Marketing Decisions Retailer Strategy Target Market Retail Store Positioning Retailer Marketing Mix Product and Service Assortment Prices Promotion Place (Location) Copyright 1999 Prentice Hall 13 -15

Click to add title Assortment and Retailer’s Product Services Decisions 13 -16 Product Assortment Decisions • Width and Depth of Assortment • Quality of Products • Product Differentiation Strategies Services Mix Key Tool of Nonprice Competition for Setting One Store Apart From Another. Store’s Atmosphere • Physical Layout • “Feel” That Suits the Target M and Moves Customers to Buy Copyright 1999 Prentice Hall

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! Copyright 1999 Prentice Hall 13 -18

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 Copyright 1999 Prentice Hall 13 -21

The Future of Retailing New Retail Forms and Shortening Retail Lifecycles Growth of Nonstore Retailing Increasing Intertype Competition Rise of Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers Copyright 1999 Prentice Hall 13 -22

Trends in Retailing 13 -23 • 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. Copyright 1999 Prentice Hall

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 • Mc. Donalds. 18% of US retailers moved out, 40% of Europeans, and 31% of Far East. Copyright 1999 Prentice Hall 13 -24

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. Copyright 1999 Prentice Hall 13 -25

Why are Wholesalers Used? 13 -26 Wholesalers are Often Better at Performing One or More of the Following Channel Functions: Management Services & Advice Market Information Risk Bearing Selling and Promoting Wholesaler Functions Financing Buying and Assortment Building Bulk Breaking Warehousing Transporting Copyright 1999 Prentice Hall

Types of Wholesalers Merchant Wholesaler Independently Owned Business that Takes Title to the Merchandise it Handles. 13 -27 Brokers/ Agents They Don’t Take Title to the Goods, and They Perform Only a Few Functions. Manufacturers’ Sales Branches and Offices Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers. Copyright 1999 Prentice Hall

Wholesaler Marketing Decisions Wholesaler Strategy Wholesaler Marketing Mix Target Market Retail Store Positioning Product and Service Assortment Prices Promotion Place (Location) Copyright 1999 Prentice Hall 13 -28

Trends in Wholesaling Developments to Consider Must Learn to Compete Effectively Over Wider and More Diverse Areas Increasing Consolidations Will Reduce Number of Wholesalers Surviving Wholesalers Will Grow Larger Through Acquisitions and Mergers Vertical Integration Will Remain Strong Global Expansion Copyright 1999 Prentice Hall 13 -29

Market logistics 13 -30 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. Copyright 1999 Prentice Hall

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. Copyright 1999 Prentice Hall 13 -31

13 -32 Each market system will lead to the follow – 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. Copyright 1999 Prentice Hall

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” Copyright 1999 Prentice Hall 13 -33

13 -34 Organizational Lessons about Marketing Logi • 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. Copyright 1999 Prentice Hall