Retailing and Wholesaling Chapter 11

Supply chain

Opening Case Study- Caterpillar For more than seven decades, Caterpillar has dominated the world’s market for heavy construction and mining equipment. Caterpillar sells more than 300 products in nearly 200 companies generating sales more than $20 billion. Caterpillar captures 27% the worldwide construction equipment business, more than double that of No.2 Komatsu Its market share in US is more than twice that of Komatsu and Deere combined. How is this happening???

Distribution in Action FedEx’s creative and imposing distribution system made it a market leader in express delivery.

What Is Retailing? Retailing: includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. Most retailing is done by retailers, but nonstore retailing has recently grown by leaps and bounds. Copyright 2007, Prentice Hall, Inc.

Types of Retailers Retailers are classified based on: Amount of service they offer Breadth and depth of product lines Relative prices charged How they are organized Copyright 2007, Prentice Hall, Inc.

Self-Service Retailers Serve customers who are willing to perform their own “locate-compare-select” process to save money. Copyright 2007, Prentice Hall, Inc.

Limited-Service Retailers: Provide more sales assistance because they carry more shopping goods about which customers need information Big C, Tesco Lotus etc Full-Service Retailers: Usually carry more specialty goods for which customers like to be “waited on.” Copyright 2007, Prentice Hall, Inc.

Major Store Retailer Types Specialty stores Department stores Supermarkets Category Killers Convenience stores Discount stores Off-price retailers Superstores Copyright 2007, Prentice Hall, Inc.

Specialty stores They carry narrow product lines with deep assortments within those lines. The increasing use of good market segmentation, market targeting and product specialization has resulted in a greater need of stores that focus on specific products and segments. Copyright 2007, Prentice Hall, Inc.

Specialty store Copyright 2007, Prentice Hall, Inc.

Department stores A retail organization that carry a wide variety of product lines- typically clothing, home furnishings, and house hold goods; each line is operated as a separate department managed by specialist buyers or merchandisers. Eg: Zen, Central stores, other shopping malls Copyright 2007, Prentice Hall, Inc.

Supermarkets These are the most frequently shopped type of retail store. Supermarkets are the Large, low-cost, low-margin, high-volume, self service stores that carries a wide variety of food, laundry, and household products. Thus most supermarkets are making improvements in to attract more customers. Copyright 2007, Prentice Hall, Inc.

Convenience stores These are small stores that carry a limited line of high-turnover convenience goods. These shops will be open for long hours seven days a week and will be located a residential area. Copyright 2007, Prentice Hall, Inc.

Superstores A store much larger than a regular supermarket that carries a large assortment of routinely purchased food products, non food items and service. Wal-Mart, Kmart etc Copyright 2007, Prentice Hall, Inc.

Category killers Giant specialty store that carries a very deep assortment of a particular line and is staffed by knowledgeable employees. Category killers are prevalent in a wide range of categories, including books, baby gear, toys, electronics, home improvement products etc. Copyright 2007, Prentice Hall, Inc.

Relative Prices Classification Discount stores Off-price retailers Independent off-price retailers Factory outlets Factory outlet malls Warehouse clubs Copyright 2007, Prentice Hall, Inc.

Warehouse club A warehouse club is a retail store, usually selling a wide variety of merchandise, in which customers are required to buy large, wholesale quantities of the store's products, which makes these clubs attractive to both bargain hunters and small business owners. In addition, customers may be required to pay annual membership fees in order to shop. Copyright 2007, Prentice Hall, Inc.

The Future of Retailing New Retail Forms and Shortening Retail Life Cycles Growth of Non store Retailing Retail Convergence Rise of the Mega retailers Growing Importance of Retail Technology Global Expansion of Major Retailers Retail Stores as “Communities” or “Hangouts” Copyright 2007, Prentice Hall, Inc.

Shortening Retail Life Cycles New retail forms continue to emerge to meet new situations and consumer needs, but the life cycle of new retail forms is getting shorter. Of the top 10 discount retailers of US in 1962, not even one exists today. This was the year today’s retail giants “Wal-Mart and Kmart has begun operations as a small retailer. Copyright 2007, Prentice Hall, Inc.

Growth of Nonstore Retailing Online retailing is the newest form of non store retailing. With easier to use web sites, improved online service, and the increasing sophistication of search technologies, online business is booming. All types of retailers now use web as an important tool. Copyright 2007, Prentice Hall, Inc.

Retail Convergence The merging of consumers, products, prices and retailers is called retail convergence. Retail convergence is the coming together of shoppers, goods and prices. Customers of all income levels are shopping to the same stores, often for the same products. Copyright 2007, Prentice Hall, Inc.

Rise of the Mega retailers The rise of huge mass merchandisers and specialty superstores, the formation of Vertical Marketing Systems and a rash of retail mergers have created a core of superpower mega retailers. Through their superior information systems and buying power, these giant retailers can offer better merchandise selections, good service, and strong price savings to consumers. For example, in the US, Wal-Mart’s revenues are five times those of P&G Wal-Mart generates 20% of the P&G’s revenues. Hence Wal-Mart can and often does use this power to wring concessions from P&G and other suppliers. Copyright 2007, Prentice Hall, Inc.

Copyright 2007, Prentice Hall, Inc.

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 2007, Prentice Hall, Inc.

Functions Provided by Wholesalers Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice Copyright 2007, Prentice Hall, Inc.