1. Direct Marketing and Marketing Resellers: Retailers and Wholesalers
Chapter 14
Direct Marketing and Marketing Resellers: Retailers and Wholesalers

2. Chapter 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.
Outline the major types of independent wholesaling intermediaries and the situations appropriate for each.
Compare the basic types of direct marketing and non-store retailing.
Explain how much the Internet has altered the wholesaling, retailing, and direct marketing environments.

3. Retailing Evolution of Retailing
Traced to trading posts such as the Hudson Bay Company and peddlers
First Retail Institution in the U.S. was the General Store
Supermarkets appeared in the early 1930s
Discount stores arrived in the 1950s
Convenience food stores emerged in the 1960s
The 1980s saw the first off-price retailers

4. Wheel of Retailing
Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current retailers, while maintaining profits through reduction of services
Once established, more services are introduced and prices rise
It then becomes vulnerable to new, lower price competitors

5. Wheel of Retailing Low-end strategy Low prices
High-end strategy
High prices
Excellent facilities and services
Upscale consumers
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

6. Retailing Strategy
A retailer develops a marketing strategy based on the firm’s goals and strategic plans
Two fundamental steps:
Selecting a target market
Developing a retailing mix to satisfy the chosen target market
Retail image: Consumers’ perceptions of a store and the shopping experience it provides

8. Selecting a Target Market
Retailers analyze demographic, geographic, and psychographic profiles to segment and select potential markets

9. Merchandising Strategy
Planograms: Diagrams of how to exhibit selections of merchandise within a store
Category management: Retailing strategy which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category

10. Exclusively designed products are part of Target’s merchandising strategy

11. The Battle for Shelf Space
Stockkeeping unit (SKU): specific product offering within a product line that is used to identify items within the line
Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

12. Customer Service Strategy
Retailers must decide on the variety of services they make available for shoppers
Examples include gift wrapping, bridal registry, return privileges, electronic shopping, and delivery and installation
Objectives are to enhance shopper comfort and attract and retain customers

13. Pricing Strategy
Markup: The amount a retailer adds to a product’s cost to determine its selling price
Determined by the services the retailer performs and the inventory turnover rate
Markdown: The amount by which a retailer reduces a product’s original selling price

14. Marshall’s
Promoting its low price strategy

15. Location/Distribution Strategy
Planned shopping center: A group of retail stores planned, coordinated, and marketed as a single unit
Four types of planned shopping centers:
Neighborhood – “strip mall”
Community – Washington Square
Regional – Mall of America
Power – stand-alone stores, single trading area
Lifestyle – Bridgeport
Company Outlets - Woodburn

16. Mall of America
Combining shopping with entertainment
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.

17. Promotional Strategy
Retailers use a variety of promotional techniques to establish store images and communicate information about their stores
Selling up: retailing selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended
Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise

18. Store Atmospherics
Physical characteristics and amenities that attract customers and satisfy their shopping needs
Disney Stores borrow from their theme parks to create a familiar shopping environment.

19. Types of Retailers Retailers can be categorized by: Form of ownership
Shopping effort expended by customer
Services provided to customers
Product lines
Location of retail transactions

21. Classification of Retailers by Form of Ownership
Chain stores
Independent Retailers
Cooperatives
Ace helps independent retailers compete with chains

22. Classification by Shopping Effort: Classification system based on the reasons why consumers shop at particular retail outlets
Retail stores can be classified as:
Convenience retailers [7/11]
Shopping stores [REI]
Specialty retailers [Nordstrom]

23. Pier 1 Imports
A shopping store

24. The North Face
A specialty retailer featuring outdoor clothing and equipment
Their products are also sold at other specialty stores

25. Classifying by Services Provided
Self-service Store (e.g., Kmart)
Self-selection Store (e.g., Winn-Dixie or Kroger grocery stores)
Full-service Retailers (e.g., Dillard’s or Macy’s)

26. Classifying by Product Lines: This classification system groups stores by the product lines they carry.
Specialty store: A retailer that typically handles only part of a single product line
Specialty retailers carry their particular products in considerable variety

27. Lady Foot Locker -- A specialty store

28. Limited-line store: A retailer that offers a large assortment within a single product line, or within a few related product lines
IKEA home furnishings and Levitz furniture
Category killers: retailers that combine huge selection and low prices within a single product line
Home Depot and Office Depot

29. Lowe’s
A category killer which competes with the likes of Home Depot

30. General merchandise retailers carry a wide variety of product lines, and stock them all in some depth
Variety store: retailer that offers an extensive range and assortment of low-priced merchandise
Department store: large store that offers a variety of merchandise, such as men’s and women’s clothing, appliances, linens, and furniture

31. Sears
The classic department store offering clothing, appliances, hardware, etc.

32. Mass merchandiser: store that stocks a wider line of goods than a department store, usually without the same depth of assortment within each line
Discount house
Off-price retailers
Outlet malls
Hypermarket
Supercenters
Showroom and Warehouse Retailers

33. Kmart
Discount mass merchandiser selling prestigious brand names

34. T.J. Maxx
An off-price retailer

35. Classification of Retail Transactions by Location
Non-store retailing – Amazon.com, 800# sales
Retail Convergence: The coming together of shoppers, goods, and prices, resulting in the blurring of distinctions between types of retailer and the merchandise mix they offer. [Similar merchandise available from multiple types of retail outlets.]
Scrambled Merchandising: concept in which a retailer combines dissimilar product lines in an attempt to boost sales volume. [Walgreens sells groceries, develops photos, sells Hallmark cards and gift items]

36. Wholesaling Intermediaries
Includes not only wholesalers who assume title to the goods they handle, but also agents and brokers, who conduct wholesaling activities without taking title of the goods.
Functions of Wholesaling Intermediaries
Creating Utility
Time utility
Place utility
Ownership/possession utility

37. Providing Services
Wholesalers commonly provide marketing services that reflect the basic marketing functions of buying, selling, storing, transporting, providing market information, financing, and risk taking
Plumbing wholesaler providing selling service

39. Lowering Costs by Limiting Contacts
Intermediaries that represent multiple suppliers cut buying and selling costs and reduce transaction time
Firms can increase transaction efficiency by only having to contact one or two intermediaries, rather than hundreds of individual suppliers

41. Types of Wholesaling Intermediaries

42. Manufacturer-Owned Facilities
Sales branch – carries inventory and takes customer orders
Sales office – no inventory, manages sales reps
Trade fair – “Trade Show”, in food industry, FMI, NRA
Merchandise mart- large grouping of permanent showrooms, mainly wholesaling, Chicago Merchandise Mart

43. Independent Wholesaling Intermediaries
Merchant wholesaler: An independently owned intermediary that takes title to the goods it sells
Rack Jobbers – specialized lines of merchandise [M&M Mars]
Cash-and-Carry Wholesalers [“Cash & Carry in Portland]
Truck Wholesalers [Frito Lay]
Drop Shippers – take title, don’t handle [coal and lumber]
Mail Order Wholesalers [McMaster Carr]

44. Table 14.2 – P.466
Comparison of the Types of Merchant Wholesalers and Their Services

45. Agents and Brokers: A second group of independent intermediaries who may or may not take possession of the goods, but never take title. They include:
Commission merchants [producers’ agents – agriculture]
Auction houses [used cars]
Brokers [don’t control pricing or promotional funding, operate in specific territories - food industry]
Selling agents [controls total marketing programs, textile industry]
Manufacturer’s agents [independent reps, sell non-competing products, may have marketing responsibilities, paid commission]

46. Table 14.3
Services Provided by Agents and Brokers

47. Retailer-Owned Cooperatives and Buying Offices
Retailers sometimes assume numerous wholesaling functions to reduce costs or provide special services
Independent retailers sometimes band together to form buying groups to save through quantity purchases
Large chains often establish centralized buying offices to negotiate large-scale purchases directly with manufacturers

48. Direct Marketing and Other Nonstore Retailing
Direct Mail is a major component of direct marketing
It comes in many forms, ranging from sales letters to video cassettes
Direct Selling completely bypasses retailers and wholesalers
Manufacturers set up their own channels to sell their products directly to consumers

49. Direct-Response Retailer Customers can order merchandise by mail or telephone, by visiting a mail-order desk in a retail store, by computer or by fax
The Retailer then ships the merchandise to the customer’s home or to a local store for pickup
Telemarketing refers to direct marketing conducted entirely by telephone
It is the most frequently used form of direct marketing

50. Internet Retailing
Many retailers operate from virtual storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders received via
Automatic Merchandising
Retailing through vending machines
About $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machines

51. End of Chapter Fourteen