Retailing and Wholesaling Chapter 11

Rest Stop: Previewing the Concepts Explain the roles of retailers in the 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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

First Stop Costco Beats Wal-Mart at its Own Game Costco Background Performance: Costco warehouse club outsells Wal-Mart’s Sam’s Club by 60% despite having 222 fewer stores. Sales have surged 66%, profits 45%, over the last 4 years. Product Offerings: Costco offers a limited selection of national and private-label brands at very low prices to members. Costs are kept low; no item is marked-up more than 14%. Operating margins average only 2.8%. Why Costco Succeeds Value Proposition: Costco carries an ever-changing assortment of high quality goods and luxury “treasure items” that Sam’s Club does not. These one-time offerings create a sense of shopping urgency among buyers. Enhanced Image: Costco has made discount shopping fashionable and draws higher income buyers. The Kirkland Signature store brand provides a quality offering for a wide range of goods. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Retailing Retailing: All activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. Most retailing is done by retailers, but nonstore retailing has recently grown by leaps and bounds. Nonstore retailing includes sales made via the internet, direct mail, catalogs, telephone, and other direct sales methods. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers The different types of retailers can be classified based on: The amount of service they offer. The breadth and depth of product lines. The relative prices charged. How they are organized. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Classification by the amount of service: Self-service retailers: Serve customers who are willing to perform their own “locate-compare-select” process to save money. Limited-service retailers: Provide more sales assistance as they carry more shopping goods about which details are needed. Full-service retailers: Usually carry more specialty goods for which customers need or want assistance or advice. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Classification by length and breadth of their product assortments: Specialty stores: Feature narrow product lines, with deep assortments (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). Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Classification by length and breadth 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 assortment of routinely purchased food goods, nonfood items, and services (e.g., Wal-Mart Supercenter, Best Buy). Category killers are really giant specialty stores. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Relative prices classification: 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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Major types of retail organizations include: Corporate chain stores: Two or more outlets that are commonly owned and controlled. Voluntary chain: Wholesaler-sponsored group of independent retailers engaged in group buying and merchandising. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Retailers Major types of retail organizations include: Retailer cooperative: Group of independent retailers who set up a central buying organization and conduct joint promotion efforts. Franchise organization: Contractual association between a franchisor and franchisees. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Retailer Marketing Decisions Major marketing decisions: Segmentation and targeting. Store differentiation and positioning. Retail marketing mix. Marketing decisions should create value for targeted retail customers. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Retailer Marketing Decisions Retail strategy: Segmentation and targeting. Store differentiation and positioning. Retailers cannot make meaningful decisions related to the retail marketing mix until they first define and profile their target market and then decide how they will differentiate and position themselves in these markets. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Retailer Marketing Decisions Retailer marketing mix: Product and service assortment Retail prices Promotion Distribution (location) Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

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 Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Retailer Marketing Decisions Place (distribution) decisions: Location is the key to success. Retailers can locate in: Central business districts. Regional shopping centers. Community shopping centers. Strip malls (neighborhood shopping center). Power centers. Lifestyle centers. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Retail Trends & Developments New retail forms and shortening retail life cycles. Slowed economy and tightened consumer spending. Growth of nonstore retailing. Retail convergence. Rise of the megaretailers. Growing importance of retail technology. Global expansion of major retailers. Retail stores as “communities” or “hangouts.” Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Wholesaling Wholesaling: Includes 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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Wholesaling Functions performed by wholesalers: Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 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. Limited-service wholesalers. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 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. Agents represent buyers on a more permanent basis. Manufacturers’ agents are the most common type of agent wholesaler. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Types of Wholesalers Manufacturers’ sales branches and offices: Involves wholesaling by sellers or buyers themselves rather than through independent wholesalers. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Wholesaler Marketing Decisions Wholesaler strategy: Segmentation, targeting, differentiation, and positioning. Wholesaler marketing mix: Product assortment and services. Price. Promotion. Distribution (location). Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall Trends in Wholesaling Need for ever greater efficiency. Demands for lower prices. Winnowing 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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall

Rest Stop: Reviewing the Concepts Explain the roles of retailers in the 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. Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall