Chapter 16 Direct Marketing and Marketing Resellers: Retailers and Wholesalers

Objectives Explain the wheel of retailing. Explain how retailers select target markets. Show how the elements of the marketing mix apply to retailing strategy. Explain the concepts of retail convergence and scrambled merchandising. Identify the functions performed by wholesaling intermediaries. Identify the major types of independent wholesaling intermediaries and the situations appropriate for each. Compare the basic types of direct marketing and nonstore retailing. Explain ways in which the Internet has altered the wholesaling, retailing, and direct marketing environments.

Retailing Describes the activities involved in selling merchandise to ultimate consumers. Represent the distribution channel to most consumers Determine locations, store hours, quality and quantity of salespeople, store layouts, merchandise selections and return policies.

Wheel of Retailing Explains the patterns of change in retailing. A new type of retailer gains a competitive foothold by offering customers lower prices. Maintains profits by reducing or eliminating services. Once established the innovator adds more services and prices gradually rise.

Wheel of Retailing Low-end strategy Low prices Limited facilities and services Price-sensitive consumers Medium strategy Moderate prices Improved facilities Broader base of value- and service-conscious consumers High-end strategy High prices Excellent facilities and services Upscale consumers

Retailing Strategy Controllable variables Selecting a target market Developing a retailing mix Retailing mix specifies: Merchandise strategy Customer service standards Pricing guidelines Target market analysis Promotion goals Location/distribution decisions Store atmosphere Uncontrollable variables Consumers Competition Technology Economic conditions Seasonality Legal restrictions Retailing Strategy

Markup The amount that a retailer adds to a product’s cost to set the final selling price. The amount of the markup typically results from: The services performed by the retailer. The inventory turnover rate. Typically state markups as percentages. Marketers determine markups based partly on their judgments.

Location Decisions Type of merchandise Financial resources Target market Site availability

Planned Shopping Center A group of retail stores designed, coordinated, and marketed as a unit to shoppers in a geographical trade area. Provide a single convenient location for shoppers. Free parking. Facilitate shopping by maintaining uniform hours of operation.

Four Main Types of Planned Shopping Centers Neighborhood Shopping Center Consists of a supermarket and group of smaller stores. Provides convenient shopping for 5,000 to 50,000 shoppers who live within a few minutes’ commute. Contains 5 to 15 stores. Product mix is usually confined to convenient goods and some shopping goods.

Four Main Types of Planned Shopping Centers Community Shopping Center Serves 20,000 to 100,000 people in a trade area extending a few miles from its location. Contains anywhere from 10 to 30 retail stores. A Branch of a local department store or some other large store as the primary tenant. Encompasses more stores featuring shopping goods. Some professional office. A branch bank. Maybe a movie theater or supermarket. Tenants often share some promotion costs.

Four Main Types of Planned Shopping Centers Regional Shopping Center At least 400,000 square feet of shopping space. Emphasizes one or more major department stores. Supplemented by as many as 200 smaller stores. Needs a location within 30 minutes’ driving time of at least 250,000 people.

West Edmonton Mall Promoted as the world’s largest mall. Over 800 stores. There are 110 eating establishments. Seven world class attractions.

Four Main Types of Planned Shopping Centers Power Center Located near a regional or superregional mall. Brings together several huge specialty stores. Rising in popularity during the 1990s. Lifestyle Center Offers a combination of shopping, entertainment and restaurant. At least 300,000 square feet. Offer the intimacy and easy access of neighborhood retailing with a fashionable cachet. No big anchor stores.

Mall of America Not just a mall but a destination. Has over 520 stores. Employs more than 12,000 people. Has between 35 and 42 million visitors per year. Mall of America is one of the most visited destinations in the United States, attracting more visitors annually than Disney World, Graceland and the Grand Canyon combined. Source: Mall of America web site

Retailers by Form of Ownership Chain Stores Chain stores are groups of retail outlets that operate under central ownership and management and handle the same product lines. Major advantage: economies of scale. May advertise in a variety of media. Independent Retailers Account for about 43 percent of all retail sales. Traditional advantage of independent stores is friendly, personalized service.

Shopping by Store Type Convenience retailers focus their marketing appeals on accessible locations, long store hours, rapid checkout service, and adequate parking facilities. Shopping stores include furniture stores, appliance retailers, clothing outlets, and sporting goods stores. Consumers usually compare prices. Specialty retailers combine carefully defined product lines, services, and reputations.

Classification by Services Consists of three retailer types: Self-service Self-selection Full-service retailers

Self Service … Look For It Coming To A Store Near You! “SYDNEY, Australia -- NCR Corp. will introduce its FastLane self-checkout lanes to consumers in Australia early next year. Two Big W stores in New South Wales will install eight of the units.” Source: KioskMarketplace.com

Classification by Product Lines Specialty store typically handles only part of a single product. Stocks in considerable depth or variety. Typically carry convenience and shopping goods. Limited-line retailers Customers find a large assortment of products within one product line or a few related lines. Typically develops in areas with a large enough population to sufficiently support it. General Merchandise retailer Carry a wide variety of product lines that are all stocked in some depth.

Convergence and Scrambled Merchandising Retail convergence, whereby similar merchandise is available from multiple retail outlets distinguished by price more than any other factor. Scrambled merchandising - in which a retailer combines dissimilar product lines in an attempt to boost sales volume.

Independent Wholesaling Two categories: Merchant wholesalers Agents and brokers Two types of wholesalers: Full function merchant wholesalers Limited function merchant wholesalers