Chapter 13 Retailing and Wholesaling Idil Yaveroglu Lecture Notes

Retailing and Wholesaling All activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailer Business whose sales come primarily from retailing. Retailers can be classified as: Store Retailers E.g. Vakko, Bauhaus Non-store Retailers E.g. Vending machines, Amazon.com

Retailing and Wholesaling All activities involved in selling goods and services to those buying for resale or business use. Wholesaler A firm engaged primarily in wholesaling activity.

Types of Retailers Department Stores: Represent manufacturers with non-competing product lines. Work under contract within protected sales territories. Prices, delivery, service, warranties, and other handling are spelled out within the contract Specialty Stores: Feature a deep assortment of products Examples: Lady Footlocker, Naturalizer Shoes, Hallmark Card Shops, Tiffany’s, and collectible sports card shops Category Killers: The ultimate in specialty stores - carries tremendous specialized items Examples: Toys ‘R’ Us, Carmax, AutoNation, etc. Convenience Stores: Serve a neighborhood with a radius of about 1.5 miles Supercenters: Combination supermarket and department store One stop shopping with up to a 30-50 mile radius in rural areas Dominant new form of growth for major retailers Supermarkets: Self-service, centralized customer service, large-scale and low-cost, price emphasis, broad assortment of merchandise

Classification of Retailers Form of Ownership Independent Retailer Corporate Chain Contractual Systems Level of Service Self-service Limited Service Full Service Merchandise Line Breath of Product Line By Organizational Approach

Classification of Retailing: Level of Service Self Service Full Service Self-Service Retailers Provide Few or No Services to Shoppers i.e. Factory outlets Warehouse clubs Limited-Service Retailers Provide Only a Limited Number of Services to Shoppers i.e. Sears Discount stores Full-Service Retailers Retailers that Provide a Full Range of Services to Shoppers i.e. Neiman Marcus Exclusive stores

Classification of Retailers: Merchandise Line A merchandise line describes how many different types of products a store carries and in what assortment. Depth of product line means that the store carries a large assortment of each item. Category Killers Specialty Stores Breadth of product line refers to the variety of different items a store carries. Department Stores, Super-centers, Hypermarkets

Breadth versus depth of merchandise lines Slide 17-19

Classification of Retailers: By Relative Price Discount stores Low margins are offset by high volume Off-price retailers Independent off-price retailers TJ Maxx, Marshall’s Factory outlets Levi Strauss, Reebok Warehouse clubs Sam’s Club, Costco

Discount Stores Target Corporation First store opened in 1902 Currently has 1,147 stores in 47 states. Builds brand name to heighten barriers to entry in the market. Began a collaboration with Sony in 2002 for Sony to design products specifically for Target. Successful in building defensible niche with middle and upper-end customers with low price but high style. Source: Datamonitor

Classification of Retailers: By Organizational Approach Corporate chain stores Commonly owned / controlled Voluntary chains Wholesaler-sponsored groups of independent retailers Retailer cooperatives Groups of independent retailers who buy in bulk Franchise organizations Based on something unique Merchandising conglomerates Diversified retailing lines and forms under central ownership

Types of Non-Store Retail Street Peddling: Oldest non-store format Major U.S. metropolitan cities Inexpensive Items Direct Mail & Catalogs: Mail order houses Catalogs such as L.L. Bean, Williams-Sonoma, Right Start, etc. Electronic Shopping: Home-based Internet shopping Automatic Merchandising (Automatic Vending): Sale of products by vending machines (but not video games) Direct Selling: Personal basis Tupperware, CUTCO, Avon Move to cold-calling instead of canvasing TV Home Shopping Telemarketing

Vending Machines - Japan Eggs Umbrellas Lobster Rice Toilet Paper Page #13 Flowers

Wholesalers Wholesalers add value by performing the following functions: Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice

Types of Wholesalers Merchant Wholesalers Brokers and Agents Full service wholesalers Limited service wholesalers Brokers and Agents Brokers and agents do not take title of the goods. Brokers Bring buyers and sellers together and assist in negotiation Agents Manufacturers’ agents Selling agents Purchasing agents Commission merchants Manufacturers’ and retailers’ branches and offices

Retail Strategy

Retailing Strategy

Retail Positioning

Retailing Mix Product: The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix. Assortment: width, depth, quality Atmosphere / ambiance Service Retail Promotion: Advertising, publicity, public relations, sales promotion Place (Proper Location): Free Standing Store Shopping Center Mall Price High Price Low Price Good Value Quality Image

Atmospherics in Retailing (Presentation) Retailers must attract customers and entice them to purchase Quality and style of products Employee helpfulness and reliability Store fixtures, spacing Appeal to the human senses Music

Mall of America The Mall of America “megamall” contains more than: 520 specialty stores, 49 restaurants, 7-acre indoor theme park, Underwater World featuring hundreds of marine specimens, And a two-story miniature golf course.