1. Retailing and Wholesaling
PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong
Chapter 13
Retailing and
Wholesaling

2. 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.

3. Classification of Retail Stores
Amount of Service
Self-Service, Limited-Service and
Full-Service Retailers
Classification of Retail Stores
This CTR relates to the material on pp
Classification of Retail Stores
Product Line
Length and Breadth of the Product
Assortment
Relative Prices
Pricing Structure that is Used
by the Retailer
Retail Organizations
Independent, Corporate, or Contractual
Ownership Organization
Store Retailing Classifications
Retailing includes all the activities in selling goods or services directly to final consumers for their personal, nonbusiness use. Retailers may be divided into two types: store retailing and non store retailing. Store retailing accounts for most retail business. Typical store classifications include:
Amount of Service. Self-service retailing is used by convenience goods sellers and most discounters. Limited-service retailers provide sales service to support shopping goods lines carried and may offer additional services such as credit. Full-service retailers are often specialty stores with narrow product lines with deep assortment and knowledgeable salespeople.
Product Line Sold. Specialty stores carry narrow product lines. Department stores carry a wide variety of lines. Supermarkets feature low-cost, high-volume, self-service on food, laundry, and household items. Convenience stores are small units that carry a limited line of high turnover items. Superstores, Combination Stores, and Hypermarkets are variations on much larger versions of supermarkets also offering other lines and/ore services.
Relative Prices. Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volumes. Off-price Retailers buy at lower than regular wholesale and sell under regular retail. The three major off-price retailers are: Factory Outlets that are owned & operated by manufacturers; Independents owned by entrepreneurs or divisions of larger corporations; and Wholesale clubs selling deeply discounted merchandise to paying members. Catalog Showrooms sell high-markup, fast-moving brand names at discount prices.
Retail Organization % of retail operations are independents, although larger chains control a much larger share of the market (See following CTR).

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

5. Classification By Retail Organization
This CTR relates to the discussion on pp
Merchandising
Conglomerates
Corporate
Chains
Control of Outlets
Major forms of categorization of retailers by control of outlets include:
Corporate Chains Corporate chains consist of two or more outlets that are commonly owned and controlled, employ central buying, and sell similar lines.
Voluntary Chains. These are wholesaler sponsored chains that nominally independent outlets join to save in costs. The wholesaler controls centralized planning, buying, and promotion decisions.
Retailer Cooperatives. These are jointly owned wholesale operations controlled by the retail members.
Franchise Organizations. A franchise is a contractual association between a manufacturer, wholesaler, or service organization and independent businesspeople.
Merchandising Conglomerates. These are corporations that combine several different retailing forms under central ownership and share distribution and management functions.
Franchise
Organizations
Voluntary
Chains
Retail Organizations
Retailer
Cooperatives

6. Characteristics of Direct Marketing
This CTR relates to the material on p. 398.
Characteristics of Direct Marketing
Privacy
Targeted
Individuals
Response
Measurement
Customized
Offer
Key
Characteristics of
Direct
Marketing
Direct Marketing
Benefits to sellers include:
Targeted Individuals. Customers can be selected from compiled list by almost any segmentation variable.
Customized Offer. Specific characteristics of individual customers can be addressed in the offer.
Immediate Orders. It is used to obtain immediate orders from targeted customers.
Continuous Customer Relationship. Actual customer patterns of behavior and indicated preferences can be tracked, further narrowing subsequent offers to product known to be wanted by the customer.
Higher Response. Direct marketing materials receive higher response rates than other forms of marketing communication.
Testing. Variations on the marketing mix can be readily tested.
Response Measurement. As customer response is directly related to specific materials, measurement is facilitated.
Privacy. Some forms of direct media can be protected from viewing by competitors.
Testing
Immediate
Orders
Higher
Response
Continuous
Relationship

7. Types of NonStore Retailing
This CTR refers to the discussion on pp
Direct Marketing
Nonstore Retailing Accounts for More Than 14% of All Consumer Purchases, and May Account for 33% of All Sales by 2000.
Direct Selling
Automatic Vending
Catalogs & Direct Mail
Direct Marketing
Direct Marketing. Direct marketing uses various media to interact with consumers, generally calling for the consumer to make a direct response to the offer being made in real time. Direct marketing offers consumers the benefits of greater convenience and time and place utility.
Direct Selling. Door-to-door retailing offers consumers products at their door.
Automatic Vending. Automatic vending involves selling directly to customers through machines. This form offers time and place utility.
Other forms include:
Catalogs and Direct Mail.
TV Shopping Shows.
Online Shopping.
Home and Office Parties.
TV Shopping Shows
Online Shopping
Home & Office Parties

8. Retailer Marketing Decisions
This CTR relates to the material on pp
Retailer Marketing Decisions
Retailer Marketing
Mix
Retailer Strategy
Product and Service Assortment
Prices
Promotion
Place (Location)
Retailer Marketing Decisions
Target Market Decision. These decisions require that the retailer carefully consider exactly what kind of customer they want to serve. Store image should support the needs and expectations of the target market in every respect.
Product Assortment and Services Decision. These decisions include matching product assortment width and depth and quality levels to shopper expectations. Variations in service mixed offerings can help retailers differentiate. Store atmosphere should be considered an assortment/service mix variable.
Price Decision. These decisions revolve around high margin/low volume vs. low margin/high volume approaches. May include traffic builders or loss leader tactics.
Promotion Decision. Promotions tools available to retailers include all elements of the promotional mix . Major decisions may include tie-ins with producer promotions.
Place . Key place decisions remain three: location, location, location!
Target Market
Retail Store Positioning

9. Key Tool of Nonprice Competition for Setting One Store Apart From
Product Assortment Decisions
Width and Depth of Assortment
Quality of Products
Product Differentiation Strategies
Click to add title
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

10. 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!

11. The Wheel of Retailing High Margin High Price High Status 1 3 2 2 3 1
This CTR relates to the discussion on pp. 406.
Instructor’s Note: The CTR and Notes contain substantial extra-textual material for expanded in-class discussion.
High Margin
High Price
High Status
The Future of Retailing
The wheel of retailing concept states that new retailing forms begin as low-margin, low-price, high volume, low status operations that slow evolve and upgrade their facilities over time. The advent of category killers and inventory tracking using high technology may signal a new development whereby value pricing retailers stay on the low-margin, high-volume end of the retailing scale while constantly improving product quality and consumer value.
The Wheel of Retailing is a theory that attempts to explain how new retail institutions enter the marketplace and how they tend to evolve and eventually decline. Outlined and summarized briefly, the theory is presented below:
Entry. New retail forms emerge on the low-price end of the market. These stores offer low-price, usually supported by poor location related to convenience, and few services.
Evolution. As the store form becomes more popular, customer demands increase the pressure to offer more services and better location. As the store form incorporates these needs into their product offerings, costs rise.
Decline. Continuing increases in costs eventually make the store form vulnerable to low-price, bare-bones store forms. Each generation of new store form entrants modifies the formula somewhat, so that low-margin store forms continue to innovate .
Teaching Tip: Many new upscale store forms do not fit into the wheel of retailing schema. For example, Wal-Mart continues to grow by not allowing costs to rise. You may wish to point out to students the descriptive, rather than predictive, nature of the model. 1 3 2 2 3
Low Margin
Low Price
Low Status 1
1 = Discount
2 = Superstore
3 = Warehouse Club
4 = Combination Store 1 2 3 4

12. 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
Retail Stores as “Communities”
or “Hangouts”

13. What is Wholesaling?
All the activities involved in selling goods and services to those buying for resale or business use.
Wholesaler - those firms engaged primarily in wholesaling activity.

14. Why are Wholesalers Used?
Wholesaling
This CTR relates to the material on p
Why are Wholesalers Used?
Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Wholesaler
Functions
Management
Services & Advice
Selling and
Promoting
Market
Information
Buying and
Assortment Building
Risk Bearing
Bulk Breaking
Transporting
Financing
Warehousing
Wholesaling
Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use.
Wholesaler Functions
Selling and Promoting. Contacts and small retailer connections help wholesalers reach more buyers than distant manufacturers.
Buying and Assortment Building. Wholesalers can select items and build assortments needed by their customers better than manufacturers.
Bulk-Breaking. Wholesalers save customers money by buying large quantities and lots and breaking them into smaller lots.
Warehousing. Wholesalers hold inventories, reducing inventory costs and risks to suppliers and customers.
Transportation. Wholesalers provide quicker transport of orders to customers than do producers.
Financing. Wholesalers extend credit.
Risk Bearing. Wholesalers take title and absorb risks for loss, damage, or theft.
Market Information. Wholesalers provide information to suppliers and customers about competitors, new products, and price developments.
Management Services and Advice. Wholesalers provide training to retailers on sales, improved store layouts, displays, and accounting and inventory control procedures.

15. 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.

16. Product and Service Assortment Retail Store Positioning
Wholesaler Marketing Decisions
Wholesaler Marketing Decisions
This CTR relates to the discussion on pp
Wholesaler Marketing
Mix
Wholesaler Strategy
Product and Service Assortment
Prices
Promotion
Place (Location)
Wholesaler Marketing Decisions
There are important differences among the marketing decisions made by wholesalers, retailers, and manufacturers, although each element of the marketing system addresses the five key decision areas:
Target Market Decision. Like all marketing operations, wholesaling needs focus. Wholesalers may target by size of customer, need for service, or other factors.
Product Assortment and Services Decision. Assortment is the product of the wholesaler. Still immediate availability of items made possible through large inventory is giving way to better stocking of faster-moving items. Inventory costs are balanced against the profitability of each line.
Price Decision. Traditionally, wholesalers markup products by a fixed percentage. Costs are deducted from this markup, leaving low single digit profits. Volume is the key.
Discussion Note: The Sam’s Club membership wholesaler chain aims that pricing to exactly cover costs. Profit is to come from the sale of memberships alone.
Promotion Decision. In general, wholesalers are not promotion-minded. But as competition increases and the wholesale market becomes more fragmented, more attention to promotion tools, especially nonpersonal ones, is likely.
Place Decision. Traditional place decisions were made on low cost factors, with little investment in facilities. Modern inventory tracking, loading, and routing systems are making place locations more strategic than simply finding large, empty, low-cost buildings.
Target Market
Retail Store Positioning

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