Distributing Products Quickly and Efficiently CHAPTER 15 * * 1-1

Channel of Distribution Marketing Intermediaries Wholesaler Retailer Agents/Brokers Role of Intermediaries Create Efficiency Value vs. Cost See Learning Goal 1: Explain the concept of marketing channels and the value of marketing intermediaries. See text pages: 404-407

Distribution Effect on Your Food Dollar (In cents) See Learning Goal 1: Explain the concept of marketing channels and the value of marketing intermediaries. See text pages: 407

They All Started in 1962 Company 1st Store Goal Wal-Mart Target Kmart Rogers, Ark. July 1962 Slash prices. Makeup difference in volume Target Roseville, MN May 1962 Discount retailer with strong sense of value Kmart Garden City, MI March 1962 Bring discount store concept to suburban malls Also available on a Transparency Acetate See Learning Goal 1: Explain the concept of marketing channels and the value of marketing intermediaries. They All Started in 1962 This slide identifies when each of these retailers was started and the strategic objective that motivated their openings. Share with the class some interesting facts about Wal-Mart: Operates more than 6,600 stores in 15 countries. Employs more than 1.8 million associates worldwide including 1.3 million in the United States. The number one retailer with over $312.4 billion in sales in fiscal 2006 with profits of over $11.2 billion. Over 176 million people visit Wal-Mart on a weekly basis Target Stores is a growth company focused exclusively on general merchandise retailing. Target has successfully positioned the company as a high value retailer with the following interesting notes to share with the students: Target’s 2005 revenues exceeded $52.6 billion, profits were $2.4 billion. Target operates over 1,444 stores in 47 states. A typical Target store is approximately 126,000 square feet in size. Target employs over 338,000 individuals. Kmart Corporation was also founded in Garden City, MI in 1962. It is a mass merchandising company that services the U.S., Puerto Rico, and the Virgin Islands. Share with the class Kmart Store Facts: There are 1,479 Kmart and Kmart Super Center retail outlets in 49 states. There are approximately 133,000 Kmart Associates. The average Big Kmart is approximately 84,000-120,000 sq. ft. in size. The average Kmart carries nearly 100,000 stock-keeping units (SKUs). Kmart successfully emerged from bankruptcy in 2003. In 2004 November, Kmart Holding Corporation and Sears, Roebuck and Co. agree to merge. The new retail company named Sears Holdings Corporation will be headquartered in Hoffman Estates, IL. Source: walmart.com, target.com, kmart.com; Business 2.0, June 2003

U.S. and International Wal-Mart Stores 2006 US Retail Units Also available on a Transparency Acetate See Learning Goal 1: Explain the concept of marketing channels and the value of marketing intermediaries. U.S. and International Wal-Mart Stores 2006 This slide presents the world’s number 1 retailer’s US stores by category and International stores by country. In July 2006, Wal-Mart had a total of 6,601 retail units worldwide. US retail units comprised 3,900 including: 1,156 Wal-Mart stores, 2,074 Supercenters, 566 Sam’s Clubs, and 104 Neighborhood Markets. International retail units comprised 2,701 with Mexico 807 retail units, Japan 394 units, United Kingdom 322 units, Brazil 293 units, and Canada 278 units. Total employees 1.8 million worldwide: 1.3 million in US and 500,000 internationally. Wal-Mart opened its first international unit in 1991 in Mexico City. Source: Wal-MartFacts.com, 2006. Wal-Mart International Source: Wal-MartFacts.com, 2006

Utilities Created by Intermediaries Form Time Possession Place Information Service See Learning Goal 2: Give examples of how intermediaries perform the six marketing utilities. See text pages: 407-409

Wholesale Intermediaries Merchant Wholesalers Full-Service Limited-Function Rack Jobbers Cash-and-Carry Drop Shippers Agents and Brokers See Learning Goal 3: Describe the various wholesale intermediaries in the distribution system. See text pages: 410-411

Retail Distribution Strategy Intensive Selective See Learning Goal 4: Explain the distribution strategies retailers use. See text pages: 412 Exclusive

Identify a Retailer In Your Area Supermarket Convenience Store Discount Store Department Store Category Killer Specialty Store Factory Outlet Superstores Catalog Showroom Warehouse club Also available on a Transparency Acetate See Learning Goal 4: Explain the distribution strategies retailers use. See text pages: 412 Identify a Retailer in Your Area This slide illustrates the different types of retail stores competing for consumer dollars. Share with the class some interesting facts about the categories listed on this slide: The first supermarket to open in the US was King Kullen Grocery Company in New York in 1930 (Source: fmi.org) The top five supermarkets in the U.S. are: Wal-Mart, Kroger, Albertson’s, Safeway, and Costco. Note: Wal-Mart and Costco are supercenters now competing in the grocery industry (Source: 2005 Grocery Sales, fmi.org). Quik trip and 7-Eleven represent the largest convenience stores. Wal-Mart, with over $312 billion in sales, is the largest discount store in the world. In the category killer segment, Home Depot, the world’s largest had 2005 sales of $81.5 billion; while Lowes, the 2nd largest had sales of $43.2 billion in fiscal 2005. Top five Specialty retailers in the US in 2004 were Best Buy, Gap, Staples, Office Depot, and Toys R Us (Source: Stores, 2004). Specialty stores carry women’s wear, men’s fashions, jewelry, electronics, and cellular phones. Factory outlets represent one of the fastest growing segment of retail. Catalog showrooms have experienced significant growth from 1998-2003. Sales have increased 9.24%, while employment has risen 3.7%. Sales revenues were expected to exceed $147.2 billion by 2005. The Department store segment has experienced troubled times since the advent of so many different retail segments. The discount store segment has placed significant pressure on department stores like Federated and May Company. Share with the class some interesting facts about department stores: Department stores are located in either strip centers (95%), or enclosed malls. In 2005, there were 48,695 shopping centers as compared to a little over 10,000 in 1970. In 2005, total leasable retail area of US Shopping Centers was over 6 billion square feet as compared to about 1.5 billion square feet in 1970. In 2004, the shopping center-inclined sales were $2.12 trillion dollars. In 2005, close to 13 million people were employed related to shopping centers. In 2005, shopping centers generated over $114 billion in State sales tax revenues. 1n 2005, approximately 190.8 million adults were shopping in these centers monthly. (Source: icsc.org)

Largest Mall in USA THE MALL OF AMERICA in Bloomington, Minnesota Large enough to hold Thirty-two 747’s Four Gap stores Aquarium Full-size amusement park More than 40 million visitors a year (more than Disney World, Graceland and the Grand Canyon combined) Also available on a Transparency Acetate See Learning Goal 4: Explain the distribution strategies retailers use. Largest Mall in USA This slide presents some interesting facts about the largest mall in the USA – The Mall of America (MOA). Ask the student, do they know which is the largest mall in the US and what do they know about it? Share with students the following additional interesting facts about the Mall of America: It cost $650 million to build It contributes more than $1.8 billion in economic impact activity every year to the State of Minnesota It comprises more than 520 stores, 20 sit down restaurants, 30 fast-food restaurants, 36 specialty food stores and 14 movie screens. It employs 11,000 year-round. It can hold 7 Yankee stadiums. (Source: mallofamerica.com) Source: The Week magazine, April 2004

The Wheel of Retailing 4. New Outlet Enters 1. Retail Outlet Starts Low Price Limited Service Low Price Limited Service Out-of-way Location Passage Of Time Also available on a Transparency Acetate See Learning Goal 4: Explain the distribution strategies retailers use. The Wheel of Retailing This slide illustrates the concept of the wheel of retailing. It helps to go through the information stage-by-stage of the life cycle and point out to students how retailing, like all products, goes through a specific life span. Discuss with the students the changes Wal-Mart has experienced. Opened in 1962 as a small general merchandise store in a rural America, Wal-Mart has grown to be the largest retailer in the world. As recently as 1998, the company began opening Sam’s Neighborhood Stores in locations they previous abandoned. These neighborhood stores are approximately 42,000-52,000 square feet in size, and compete with grocery stores by offering 28,000 items including banking and pharmacies. 3. Retail Outlet 2. Retail Outlet Higher Prices Higher Status Adds Service Raises Prices Better Location

Nonstore Distribution Electronic retailing Telemarketing Vending Machines, Kiosks, Carts Direct Selling Multilevel Marketing Direct Marketing See Learning Goal 5: Explain the various kinds of nonstore retailing. See text pages: 413-416

Top Internet Shopping Sites By Millions of Visitors in October 2005 Also available on a Transparency Acetate See Learning Goal 5: Explain the various kinds of nonstore retailing. Top Internet Shopping Sites This slide presents the top five online shopping sites in October 2005. The students should be very familiar with and it should not come as a surprise at least the first two: eBay and Amazon. They very well may have been shopping online at these sites as well. Ask the students – how many of them shop online and on which sites? Which is their favorite shopping sites? Why? Share with the students the fact that Dell was number 10 in top online shopping site. Are they surprised as to Dell at 10 and Apple at number 5? (One reason can be attributed to the popularity of Apple ipods.) The following were number 6-10 online shopping sites: Shopzilla, Overstock, American Greetings, Yahoo, and Dell. (Source: Investors Business Daily, November 23, 2005) Source: Investors Business Daily, November 23, 2005

Top Internet Comparison-Shopping Sites By Millions of Visitors in October, 2005 Also available on a Transparency Acetate See Learning Goal 5: Explain the various kinds of nonstore retailing. Top Internet Comparison-Shopping Sites This slide shows the top Internet comparison shopping sites and goes well with the previous slide (Top Internet Shopping Sites). Ask the students – do they use comparison shopping sites? Which ones and for what type of products? The top five comparison shopping sites are: Shopping.com, Shopzilla, Yahoo, Nextag, and Shop Local. Monster Marketplace was number 10 on the list. (Source: Investors Business Daily, November 23, 2005) Shopping.com was acquired by eBay in August 2005. Source: Investors Business Daily, November 2005

10 Ways to Increase Sales on eBay Accept multiple payment options. Take good pictures. Write detailed, compelling descriptions. Work to maintain your eBay feedback rating. Provide good customer service. Open an eBay Store. Let them Buy It Now. Choose Multiple listing categories and upgrade features. Try shorter auction times. Offer satisfaction guarantees, warranties, or returns. Also available on a Transparency Acetate See Learning Goal 5: Explain the various kinds of nonstore retailing. 10 Ways to Increase Sales on eBay Given than eBay is the number one online shopping site and many students may have shopped or interested in learning about eBay, this slide presents 10 ways to increase sales on eBay. Before showing this slide ask the students, either based on their experience or what they have heard from other users of eBay, what can/should be done to increase sales on eBay? Can some of these tips be applied to other auction or sales outside of eBay? (Other than item number 4 and 6 which are eBay specific, all other tips can be used in other auctions or sales. Item number 4 can be used as feedback in other sales, etc.) In September 2006, eBay offered localized sites in 24 countries. Source: allbusiness.com, accessed August 9, 2006.

Why People Don’t Shop Online Also available on a Transparency Acetate See Learning Goal 5: Explain the various kinds of nonstore retailing. Why People Don’t Shop Online This slide presents the top reasons as to why people don’t shop online. Ask the students – do they have hesitations about shopping online? Why or why not? In today’s age of identity theft and security issues, the number one reason (61% of respondents) was people did not want to give personal financial information on the Net. About 55% of the respondents indicated that they actually want to be able to see things before buying them. Ask the students – How many of them use the Internet for researching products/services and then buying them in a store? (About 26% of the respondents indicated that they preferred to do that.) (Source: Forrester) Source: Forrester

Channel Cooperation Corporate Distribution Contractual Distribution Administered Distribution Supply Chain Management See Learning Goal 6: Explain the various ways to build cooperation in channel systems. See text pages: 416-418

The Supply Chain Also available on a Transparency Acetate See Learning Goal 6: Explain the various ways to build cooperation in channel systems. See text pages: 417 The Supply Chain Supply chain management is a key to effective distribution in the 21st century. This acetate illustrates to students how supply chains are structured and implemented in the market. Everyday companies in the U.S. lose billions of dollars in unrealized savings due to poor channel management. Companies should carefully analyze the following areas of their supply chain to improve service and reduce costs: Procurement Demand forecasting Planning and optimization Transportation Material handling - barcodes, radio-wave technology Warehouse management To improve chain efficiency and improve supply chain flow, CIO magazine recommends the following steps: Know your costs Serve your partners Organize for flexibility Create sharing cultures for information Do not overestimate IT Let IT configure for you

Logistics Physical Distribution Inbound Materials handling Outbound Reverse Information See Learning Goal 7: Describe the emergence of logistics. See text pages: 418-419

Transportation & Storage Modes Air Intermodal Warehousing Storage Distribution Railroad Motor Vehicles Water Pipeline See Learning Goal 8: Outline how intermediaries move goods from producers to consumers through the use of various transportation modes ad storage functions. See text pages: 420-423