1. © 2013 Cengage Learning. All rights reserved. 1-1

2. 1-2 15: Retailing, Direct Marketing, and Wholesaling Part 6: Distribution Decisions © 2013 Cengage Learning. All rights reserved.

3. 1-3  Understand the purpose and function of retailers in the marketing channel  Identify the major types of retailers  Explore strategic issues in retailing  Recognize the various forms of direct marketing and selling  Examine franchising and its benefits and weaknesses  Understand the nature and functions of wholesaling  Understand how wholesalers are classified

4. 1-4  Retailing: Includes all transactions in which the buyer intends to consume the product through personal, family, or household use  Can occur in stores, through direct selling, direct marketing, vending machines, and online  Retailer: An organization that purchases products for the purpose of reselling them to ultimate consumers  Creates utility (time, place, possession, and form) for consumers © 2013 Cengage Learning. All rights reserved.

5. 1-5  Over 1.1 million retailers in the United States  Around 20% of all employees in the U.S. work in retail  The majority of personal income is spent in retail establishments  Retailers are the critical link between producers and ultimate consumers  Facilitate exchanges with ultimate consumers © 2013 Cengage Learning. All rights reserved.

6. 1-6  Provide services  Assist in product selection  Make the shopping experience more convenient  Location may facilitate comparison shopping  Demonstrate products  Create utility for ultimate consumers © 2013 Cengage Learning. All rights reserved.

7. 1-7  General merchandise retailers  Department stores  Discount stores  Convenience stores  Supermarkets  Superstores  Hypermarkets  Warehouse clubs  Warehouse showrooms © 2013 Cengage Learning. All rights reserved.

8. 1-8  Department stores: Large retail organizations with wide product mixes; employ at least 25 people  Discount stores: Self-service, general merchandise outlets that regularly offer brand name and private brand products at low prices  Convenience stores: Small, self-service stores that are open long hours and carry a narrow assortment of products, usually convenience items, as well as services such as automatic teller machines © 2013 Cengage Learning. All rights reserved.

9. 1-9  Supermarkets: Large self-service stores that carry a complete line of food products and some nonfood products  Superstores: Giant retail outlets that carry products ordinarily found in supermarkets, but also routinely purchased consumer products  Hypermarkets: Combine supermarket and discount store shopping in one location © 2013 Cengage Learning. All rights reserved.

10. 1-10  Warehouse clubs: Large-scale, members-only selling operations combining cash-and-carry wholesaling and discount retailing  Warehouse showrooms: Retail facilities in large, low-cost buildings with warehouse materials- handling technology, vertical merchandise displays, large on-premises inventories, and minimal services © 2013 Cengage Learning. All rights reserved.

11. 1-11  Costco is a general-merchandise retailer, but which type is it? © Justin Sullivan/Getty Images

12. 1-12  Traditional specialty retailers carry a narrow product mix with deep product lines  They are sometimes called limited-line retailers.  Category killers are very large specialty stores concentrating on a major product category and competing on the basis of low prices and product availability  Off-price retailers buy manufacturers’ seconds, overruns, returns, and off-season production runs at below-wholesale prices for resale to consumers at deep discounts © 2013 Cengage Learning. All rights reserved.

13. 1-13  Here are the top 10 retailers in the United States.  Do any of the names on this list surprise you? Note: U.S. retail sales in billions of dollars. Source: “2011 Top 100 Retailers,” NRF Stores Magazine, July 2011, www.stores.org/2011/Top-100-Retailers (accessed July 19, 2011). © 2011 Stores Magazine. Used with permission.

14. 1-14  The least flexible of the strategic retailing issues, but very important  Factors affecting retail store location  Location of intended target market  Kinds of products sold  Availability of transportation and ease of movement to/from site  Competitors’ locations  Types of locations  Free-standing structures  Shopping malls and centers  Business districts © 2013 Cengage Learning. All rights reserved.

15. 1-15  Neighborhood shopping centers  Usually consist of several small convenience and specialty stores  Community shopping centers  Contain one or two department stores, some specialty stores, and convenience stores © 2013 Cengage Learning. All rights reserved.

16. 1-16  Regional shopping centers  Feature the largest department stores, widest product mixes, and deepest product lines of all shopping centers Superregional shopping centers: Have the widest and deepest product mixes Lifestyle shopping centers: Typically open-air and feature upscale stores Power shopping centers: Combine off- price stores with category killers © 2013 Cengage Learning. All rights reserved.

17. 1-17  Retail positioning: Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers © 2013 Cengage Learning. All rights reserved.

18. 1-18  Projecting a functional and psychological picture that appeals to the target market  Atmospherics: The physical elements in a store’s design that appeal to consumer’s emotions and encourage buying Exterior atmospherics (storefront, displays, entrances) Interior atmospherics (lighting, wall and floor coverings, store fixtures) © 2013 Cengage Learning. All rights reserved.

19. 1-19  A Spanish clothing retailer  Click here to access websitehere  Popular for its low-cost and trendy clothing  Famous for its quick production and distribution times  Allows it to stay ahead of the competition in the fast-moving fashion industry  Retail presence in 73 countries

20. 1-20  A retail strategy of managing groups of similar, often substitutable, products produced by different manufacturers  Represents a move toward a collaborative supply-chain initiative that enhances customer value © 2013 Cengage Learning. All rights reserved.

21. 1-21  The use of telephone, Internet, and nonpersonal media to communicate product and organizational information to customers  Nonstore retailing: Selling products outside the confines of a retail facility Accounts for an increasing proportion of total retail sales © 2013 Cengage Learning. All rights reserved.

22. 1-22  When an organization provides a catalog from which customers make selections and place orders via mail, telephone, or the Internet  Advantages  Customers benefit from efficiency and convenience  The retailer benefits by being able to locate in remote, low-cost areas, save on expensive store fixtures, and reduce personal selling and store operating expenses  Disadvantages  Inflexible  Limited service  Only effective for some products © 2013 Cengage Learning. All rights reserved.

23. 1-23  Occurs when a retailer advertises a product and makes it available through mail or telephone orders  Often conducted on television, but mailings, samples, brochures, and booklets are also common © 2013 Cengage Learning. All rights reserved.

24. 1-24  The performance of marketing-related activities by telephone  Can help generate sales leads, improve customer service, accelerate payments on past- due accounts, raise funds for nonprofit organizations, and gather marketing data  Laws and regulations regarding telemarketing have become more restrictive © 2013 Cengage Learning. All rights reserved.

25. 1-25  Presents products to television viewers who make purchases using toll-free numbers and pay with credit cards  Easy demonstration of products  Consumers shop at their convenience in their homes © 2013 Cengage Learning. All rights reserved.

26. 1-26  Makes products available through computer connections  New retail opportunities  Easy comparison shopping and ordering  Easier than ever to find upscale and rare items  Online security is a serious problem © 2013 Cengage Learning. All rights reserved.

27. 1-27  The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace  Advantages  Marketers can demonstrate products where they will be used  Customers get personal attention  Products are presented at convenient times and locations for customers  Disadvantages  Is the most expensive form of retailing  Some customers do not trust direct sellers  Some communities prohibit direct selling © 2013 Cengage Learning. All rights reserved.

28. 1-28  The use of machines to dispense products selected by customers  Is the most impersonal form of retailing  Machines need only a small amount of space and no sales personnel  Equipment is expensive and requires servicing and repair © 2013 Cengage Learning. All rights reserved.

29. 1-29  Many products are sold via vending machines  Some countries get creative  Aldi supermarkets in Germany sell freshly baked bread out of vending machinesfreshly baked bread  Japan has vending machines that grow vegetablesgrow vegetables  China has vending machines that dispense live crabslive crabs  What is the strangest thing you have seen sold out of a vending machine?

30. 1-30  An arrangement in which a supplier, or franchiser, grants a dealer, or franchisee, the right to sell products in exchange for some type of consideration © 2013 Cengage Learning. All rights reserved.

31. 1-31  Enables a franchisee to start a business with limited capital and to benefit from the business experience of others  The franchiser gains fast product distribution without incurring the costs of constructing and operating its own outlets  Franchisees are usually highly motivated to succeed © 2013 Cengage Learning. All rights reserved.

32. 1-32  The franchiser can dictate many aspects of the business—there is little franchise autonomy  The franchisee must pay to use the franchiser’s name, products, and assistance  The franchiser gives up control when entering into a franchise agreement © 2013 Cengage Learning. All rights reserved.

33. 1-33

34. 1-34  All transactions in which products are bought for resale, for making other products, or for general business operations © 2013 Cengage Learning. All rights reserved.

35. 1-35  Serve as an extension of the producer’s sales force  Often pay for transporting goods  Reduce a producer’s warehousing expenses and inventory investment by holding goods in inventory  Extend credit and assume losses from buyers who are poor credit risks  Can be a source of working capital  Serve as conduits for information within the marketing channel © 2013 Cengage Learning. All rights reserved.

36. 1-36  Assist with marketing strategy and distribution  Help select inventory  Are often specialists on market conditions and experts at negotiating final purchases  Can reduce a retailer’s burden of looking for and coordinating supply sources © 2013 Cengage Learning. All rights reserved.

37. 1-37  Independently owned businesses that take title to goods, assume risks associated with ownership, and generally buy and resell products to other wholesalers, business customers, or retailers © 2013 Cengage Learning. All rights reserved.

38. 1-38

39. 1-39  Perform the widest range of wholesaling functions  Types of full-service wholesalers  General-merchandise wholesalers: Carry a wide product mix, but offer limited depth within product lines  Limited-line wholesalers: Carry few product lines, but offer an extensive assortment of products within those lines  Specialty-line wholesalers: Offer the narrowest range of products  Rack jobbers: Full-service, specialty-line wholesalers that own and maintain display racks in supermarkets, drugstores, and discount and variety stores © 2013 Cengage Learning. All rights reserved.

40. 1-40  Provide fewer marketing services than full-service wholesalers and specialize in just a few functions, passing on the rest to producers, customers, or other intermediaries  Cash-and-carry wholesalers: Intermediaries whose customers pay cash and furnish transportation  Truck wholesalers (Truck jobbers): Transport a limited line of products directly to customers for on- the-spot inspection and selection  Drop shippers (Desk jobbers): Take title to products and negotiate sales, but never take possession of products  Mail-order wholesalers: Use catalogs instead of sales forces to sell products to retail and business customers © 2013 Cengage Learning. All rights reserved.

41. 1-41

42. 1-42  Brokers: Intermediaries that buyers and sellers employ temporarily  Agents: Represent either buyers or sellers on a permanent basis  Types of agents Manufacturers’ agents: Independent intermediaries who represent sellers and usually offer customers complete product lines Selling agents: Market either all of a specified product line or a manufacturer’s entire output Commission merchants: Receive goods on consignment from local sellers and negotiate sales in large, central markets © 2013 Cengage Learning. All rights reserved.

43. 1-43

44. © 2013 Cengage Learning. All rights reserved. 1-44

45. 1-45  Sales branches: Manufacturer-owned intermediaries that sell products and provide support services to the manufacturer’s sales force  Sales offices: Manufacturer-owned operations that provide services normally associated with agents; they carry no inventory © 2013 Cengage Learning. All rights reserved.

46. 1-46 RetailingOff-price retailers RetailerNeighborhood shopping centers General-merchandise retailerCommunity shopping centers Department storesRegional shopping center Discount storesSuperregional shopping center Convenience storeLifestyle shopping center SupermarketsPower shopping center SuperstoresRetail positioning HypermarketsAtmospherics Warehouse clubsCategory management Warehouse showroomsDirect marketing Traditional specialty retailersNonstore retailing Category killerCatalog marketing

47. © 2013 Cengage Learning. All rights reserved. 1-47 Direct-response marketingRack jobbers TelemarketingLimited-service wholesalers Television home shoppingCash-and-carry wholesalers Online retailingTruck wholesalers Direct sellingDrop shippers Automatic vendingMail-order wholesalers FranchisingAgents WholesalingBrokers WholesalerManufacturers’ agents Merchant wholesalersSelling agents Full-service wholesalersCommission merchants General-merchandise wholesalersSales branches Limited-line wholesalersSales offices Specialty-line wholesalers