Seventh Edition Copyright © by Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 15 Pride I Hughes I Kapoor Chapter Wholesaling, Retailing, and Physical Distribution

Copyright © by Houghton Mifflin Company. All rights reserved.15–2 Channels of Distribution Channel of distribution (or marketing channel) –A sequence of marketing organizations that directs a product from the producer to the ultimate user. Middleman (or marketing intermediary) –A marketing organization that links a producer and user within a marketing channel. Merchant middleman—takes title to products by buying them. Functional middleman—helps in the transfer of ownership of products but does not take title to the products. Retailer—buys from producers or other middlemen and sells to consumers. Wholesaler—a middleman that sells products to other firms.

Copyright © by Houghton Mifflin Company. All rights reserved.15–3 Channels for Consumer Products Producer to consumer (direct channel) –The marketing channel includes no intermediaries. –The distribution channel used by all services and consumer goods that are sold directly to the consumer. Producer to retailer to consumer –Producers sell directly to large retailers (e.g., Wal-Mart) and to others where shipping and handling costs are high, where the products are perishable, or fashion products that need to reach the consumer as soon as possible. Producer to wholesaler to retailer to consumer –The traditional channel where the wholesaler services the numerous retailers for the producer.

Copyright © by Houghton Mifflin Company. All rights reserved.15–4 Channels for Consumer Products Producer to agent to wholesaler to retailer to consumer –Agents market producer products to wholesalers on a commission basis. Multiple channels for consumer products –Manufacturers use different channels to reach different market segments. Channels for business products –Producer to business user—a direct channel in which the manufacturer’s own sales force sells directly to the consumer. –Producer to agent middleman to business user—an independent intermediary represents the manufacturer to the consumer.

Copyright © by Houghton Mifflin Company. All rights reserved.15–5 Distribution Channels Producer Wholesaler Retailer Consumer ProducerAgentWholesaler CONSUMER PRODUCTS RetailerConsumer Producer Agent middleman BUSINESS PRODUCTS Business customer Business customer Figure 15.1

Copyright © by Houghton Mifflin Company. All rights reserved.15–6 Partnering Through Supply Chain Management Supply chain management –A long-term partnership among channel members working to create a distribution system that reduces inefficiencies, costs, and redundancies while creating competitive advantage and satisfying customers. –The use of bar code data, electronic data interchange, and online business-to-business selling has increased productivity by reducing inventory, shortening cycle time, and removing wasted human effort.

Copyright © by Houghton Mifflin Company. All rights reserved.15–7 Marketing Intermediaries: Wholesalers Types of wholesalers –Merchant wholesalers—middlemen that purchase goods in large quantities and then sell them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users. Full-service wholesalers (general merchandise wholesaler, limited- line wholesaler, specialty-line wholesaler) and limited-service wholesalers –Commission merchants, agents, and brokers—functional middlemen that do not take title to products and who are paid a commission for their marketing activities. –Manufacturers’ sales branches and sales offices—Merchant wholesalers and sales agents owned and controlled by the manufacturers.

Copyright © by Houghton Mifflin Company. All rights reserved.15–8 Efficiency Provided by an Intermediary The services of an intermediary reduce the number of contacts, or exchanges, between producers and buyers, thereby increasing efficiency. Producer Buyer Middleman or intermediary Producer Buyer Figure 15.3 Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 2000e. Copyright © 2000 by Houghton Mifflin Company, Adapted with permission.

Copyright © by Houghton Mifflin Company. All rights reserved.15–9 Marketing Intermediaries: Wholesalers Justifications for marketing intermediaries –Intermediaries perform essential marketing services. –Manufacturers would be burdened with additional record keeping and maintaining contact with numerous retailers. –Costs for distribution would not decrease, and could possibly increase due to the marketing inefficiencies of producers. Wholesalers’ services to retailers –Promotion—wholesalers promote products to retailers. –Market information—wholesalers are a two-way source of market information for both producers and retailers. –Financial aid—wholesalers provide timely product deliveries that reduce inventory costs for retailers and extend credit to retailers for inventory purchases.

Copyright © by Houghton Mifflin Company. All rights reserved.15–10 Marketing Intermediaries: Wholesalers Wholesalers’ services to manufacturers –Providing instant, ready-made sales forces to manufacturers. –Reducing manufacturers’ inventory costs by purchasing finished goods in sizable quantities. –Assuming the credit risks associated with selling to retailers. –Furnishing market information gleaned from the market and customers to the manufacturers.

Copyright © by Houghton Mifflin Company. All rights reserved.15–11 Market Coverage Intensity of market coverage –Intensive distribution—the use of all available outlets for a product to saturate the market. –Selective distribution—the use of only a portion of the available outlets for a product in each geographic area. –Exclusive distribution—the use of only a single retail outlet for a product in a larger geographic area.

Copyright © by Houghton Mifflin Company. All rights reserved.15–12 Market Coverage distribution Willow Street Intensive Washington Blvd. Ashley Street Selective Exclusive Jerry Street Pearl Street      Main Avenue Figure 15.2 The number of outlets a producer chooses for a product depends on the type of product. Batteries, for example, are distributed intensively in this area; sports equipment is selectively distributed, and Stubenglass is exclusively distributed.

Copyright © by Houghton Mifflin Company. All rights reserved.15–13 Marketing Intermediaries: Retailers Classes of in-store retailers –Independent retailer—a firm that operates only one retail outlet. –Chain retailer—a company that operates more than one retail outlet. –Department store—a retail store that (1) employs twenty-five or more persons and (2) sells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different part of the store. –Discount store—a self-service, general merchandise outlet that sells goods at lower-than-usual prices.

Copyright © by Houghton Mifflin Company. All rights reserved.15–14 Marketing Intermediaries: Retailers (cont’d) Classes of in-store retailers (cont’d) –Catalog showroom—a retail outlet that displays well-known brands and sells them at discount prices through catalogs within the store. –Warehouse showroom—a retail facility in a large, low-cost building with large on-premises inventories and minimal service. Wonderbar Bedding Warehouse & Showroom

Copyright © by Houghton Mifflin Company. All rights reserved.15–15 Physical Distribution (cont’d) Warehousing –The set of activities involved in receiving and storing goods and preparing them for reshipment. –Warehousing activities: Receiving goods from producers. Identifying and verifying goods received. Sorting goods for storage. Dispatching goods to storage. Holding goods in storage. Recalling, picking, and assembling goods for shipment. Dispatching shipped goods. –Types of warehouses: Private warehouses are owned by a firm to serve its needs. Public warehouses offer storage space to all firms.

Copyright © by Houghton Mifflin Company. All rights reserved.15–16 Marketing Intermediaries: Retailers (cont’d) Classes of in-store retailers (cont’d) –Convenience store—a small food store that sells a limited variety of products but remains open well beyond normal business hours. –Supermarket—A large self-service store that sells primarily food and household products. –Superstore—A large retail store that carries not only food and nonfood products ordinarily found in super- markets but also additional product lines. –Warehouse club—A large-scale, members-only establishment that combines features of cash-and-carry wholesaling with discount retailing.

Copyright © by Houghton Mifflin Company. All rights reserved.15–17 Marketing Intermediaries: Retailers (cont’d) Classes of in-store retailers (cont’d) –Traditional specialty store—a store that carries a narrow product with deep product lines. –Off-price retailer—a store that buys manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts. –Category killer—a very large specialty store that concentrates on a single product line and competes on the basis of price and product availability. Pets R’ Us

Copyright © by Houghton Mifflin Company. All rights reserved.15–18 Kinds of Nonstore Retailing Nonstore retailing –A type of retailing whereby consumers purchase products without visiting a store. –Direct selling—the marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace. –Direct marketing—using computers, telephones, and nonpersonal media to show products to customers, who can then purchase them by mail, telephone, or online. –Catalog marketing—marketing in which an organization provides a catalog from which customers make selections and place orders by mail or telephone. –Direct response marketing—marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders.

Copyright © by Houghton Mifflin Company. All rights reserved.15–19 Kinds of Nonstore Retailing (cont’d) Nonstore retailing (cont’d) –Telemarketing—the performance of marketing-related activities by telephone. –Television home shopping—selling in which products are displayed to home viewers, who can then order the products by calling a toll-free number and paying by credit card. –Online retailing—presenting and selling products through computer connections. –Automatic vending—the use of machines to dispense products.