Managing Retailing, Wholesaling, And Logistics

Retailers - businesses whose sales come primarily from retailing. 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.

Classification of Retail Stores Amount of Service Self-Service, Limited-Service and Full-Service Retailers Product Line Length and Breadth of the Product Assortment Classification of Retail Stores Relative Prices Pricing Structure that is Used by the Retailer Retail Organizations Independent, Corporate, or Contractual Ownership Organization

Types of Retailers Amount of service Self service retailers: serve customers who are willing to perform their own process to save time or money such as supermarkets.

Types of Retailers Amount of service  Limited service retailers: such as Sears provide more sales assistance because they carry more shopping goods about which customers need information. Their increased operating costs result in higher prices

Types of Retailers Amount of service  Full service retailers : salespeople assist customers in every phase of the shopping process. Full service stores usually carry more specialty goods for which customers need or want assistance or advice. *Result in higher operating costs , which is passed along to customers as higher prices.

Classification By Product Line Length and Breadth of Assortment Store Type Product 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

Department Store Model: The Showcase Store

Types of Retailers Relative Prices Retailing Types of Retailers Relative Prices Discount stores Off-price retailers Factory outlets Warehouse clubs

Relative prices Discount store: a retail operation that sells standard merchandise at lower prices by accepting low margins and selling at higher volume.  Off price retailer: a retailer that buys at less than regular wholesale prices and sells at less than retail The three main types of the off price retailers are independents, factory outlets and warehouse divisions of larger retail corporations

Off price retailer Independent off price retailer: an off price retailer that is either independently owned and run or is a division of a larger retail corporation.  Factory outlet: which is owned and operated by a manufacturer and that normally carries the manufacturer’s surplus, discontinued or irregular goods.  Warehouse club: which sells a limited selection of brand name grocery items, clothing or other goods at deep discounts to members who pay annual membership fees

Types of Retailers Organizational Approach Merchandising Conglomerates Corporate Chains Franchise Organizations Voluntary Chains Retail Organizations Retailer Cooperatives

Types of Retailers Organizational Approach Corporate chains are 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 selling similar lines of merchandise, highly skilled employees. Sears  Voluntary chains are wholesale-sponsored groups of independent retailers that engage in group buying and common merchandising IGA Western Auto

Types of Retailers Organizational Approach Retailer cooperatives is a group of independent retailers that band together to set up a joint-owned, central wholesale operation and conduct joint merchandising and promotion effort Ace Hardware Associated Grocers

Types of Retailers Organizational Approach  Franchise organizations are based on some unique product or service; on a method of doing business; or on the trade name, good will, or patent that the franchisor has developed Contractual association between franchiser (manufacturers, wholesalers, service organizations) and franchisee who are authorized to use the brand name. McDonalds ….

Types of Retailers Organizational Approach  Merchandising conglomerates are corporations that combine several retailing forms under central ownership Limited Brands Several diversified retailing lines with integration in management and distribution.

Corporate Retail Organizations Features of corporate retailing 1-Greater purchasing power 2-Achieve economies of scale 3-Wider brand recognition 4-Better trained employees

Types of NonStore Retailing 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 Home & Office Parties

Characteristics of Direct Marketing Key Characteristics of Direct Marketing Immediate Orders Response Measurement Targeted Individuals Privacy Customized Offer Continuous Relationship Higher Testing

Create Value for Targeted Retail Customers Retailer Marketing Decisions Retailer Strategy Retailer Marketing Mix -Product and Service Assortment -Retail Prices -Promotion -Place (Location) Target Market Retail Store Positioning Create Value for Targeted Retail Customers

Retailer’s Product Assortment and Services Decisions Product Assortment Decisions -Width and Depth of Assortment -Quality of Products -Product Differentiation Strategies Retailer’s Product Assortment and Services Decisions Services Mix Key Tool of Nonprice Competition for Setting One Store Apart From Another. Store’s Atmosphere Physical Layout “Feel” That Suits the Target Market and Moves Customers to Buy

Postpurchase services Retailer Services Mix Prepurchase services Postpurchase services Ancillary services

Retailer’s Price, Promotion, and Product & Services Assortment 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!

Location Decision * General business districts * Regional shopping centers * Community shopping centers * Strip malls * Location within a larger store

Number of people passing by Indicators of Sales Effectiveness Number of people passing by % who enter store % of those who buy Average amount spent per sale

Wall Mart’s Factors of Success: 1-Listen to the customers. 2-Treat employees as partners. 3-Big sign reading (Satisfaction guaranteed), (we sell for less). 5-Customers often welcome by greeter 6-Low price and speed stock replenishment. 7-Expanded their stories outside of US

The Future of Retailing New Retail Forms and Shortening Retail Lifecycles Growth of Nonstore Retailing Increasing Intertype Competition The Future of Retailing Rise of Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers

Trends in Retailing  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.

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 McDonalds. 18% of US retailers moved out, 40% of Europeans, and 31% of Far East.

Buying assortment building Management services and advice Wholesaling Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use Selling and promoting Buying assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice

Wholesaling Selling and promoting involves the wholesaler’s sales force helping the manufacturer reach many smaller customers at lower cost Buying assortment building involves the selection of items and building of assortments needed by their customers, saving the customers work 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

Wholesaling Transportation involves the wholesaler providing quick delivery due to its proximity to the buyer 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 Market information involves the wholesaler providing information to suppliers and customers about competitors, new products, and price developments

Wholesaling Management services and advice involves wholesalers helping retailers train their sales clerks, improve store layouts, and set up accounting and inventory control systems

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

Types of Wholesalers Merchant wholesalers is the largest group of wholesalers and include: Full-service wholesalers who provide a full set of services  Limited service wholesalers who provide few services and specialized functions

Types of Wholesalers Brokers and agents do not take title, perform a few functions, and specialize by product line or customer type Brokers bring buyers and sellers together and assist in negotiations Agents represent buyers or sellers Manufacturers’ sales branches and offices is a form of wholesaling by sellers or buyers themselves rather than through independent wholesalers

Wholesaler Marketing Decisions Wholesaling Wholesaler Marketing Decisions

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

Wholesaler Marketing Decisions Wholesaling Wholesaler Marketing Decisions 1-Target market and positioning decisions 2-Size of customer 3-Type of customer 4-Need for service

Wholesaler Marketing Decisions Wholesaling Wholesaler Marketing Decisions

Trends in Wholesaling  Resistance to price increases Challenges  Resistance to price increases  Lack of suppliers  Changing customer needs  Adding value by increasing efficiency and effectiveness

Market logistics *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.

Market-logistics objectives Getting the right goods to the right places at the right time for the least cost.

Organizational Lessons about Marketing Logistics: 1-Market logistics decisions must be based on profit maximizing rather than cost consideration 2-Electronic links among all parties should be established 3-Logistics goals should match or exceed competitors’ service standards.

Each market system will lead to the following costs. 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.

•Order Processing “system of ordering” 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”

Organizational Lessons about Marketing Logistics: 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.

Market Logistics Decisions 1-How should orders be handled? 2-Where should stock be located? 3-How much stock should be held? 4-How should goods be shipped?