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Managing Retailing, Wholesaling, and Logistics


16 Managing Retailing, Wholesaling, and Logistics Marketing Management, 13th ed – PowerPoint PPT presentation

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Title: Managing Retailing, Wholesaling, and Logistics

Managing Retailing, Wholesaling, and Logistics
Marketing Management, 13th ed
Chapter Questions
  • What major types of marketing intermediaries
    occupy this sector?
  • What marketing decisions do these marketing
    intermediaries make?
  • What are the major trends with marketing

Starbucks Hear Music Coffeehouse
What is Retailing?
Retailing includes all the activities involved in
selling goods or services directly to final
consumers for personal, non-business use.
Planning a Retailers Strategy
Product Selection
Key Features Affecting Consumers Retail Choice
Fairness in Dealings
Helpful Information
Social Image
Major Retailer Types
  • Specialty storenarrow product line
  • Department store several product lines
  • Supermarketlarge, low-cost, low-margin,
    high-volume, self-service store designed to meet
    total needs for food and household products
  • Convenience storesmall store in residential
    area, often open 24/7, limited line of
    high-turnover convenience products plus take out
  • Discount storestandard or specialty merchandise
    low-margin, high-volume stores
  • Off-price retailerleftover goods, overruns,
    irregular merchandise sold at less than retail
  • Superstorehuge selling space, routinely purchase
    food and household items, plus services (laundry,
    shoe repair, dry cleaning, check cashing
    category killer)
  • Catalog showroom broad selection of high-markup,
    fast-moving, brand-name goods sold by catalog at

Conventional Retailers Avoid Price Competition
Ritz Camera, Coach, Gap, Macys
Retailer Size and Profits
  • Large retail stores do most of the business
  • Only about 11 of stores sell over 5 million
    annually but they account for almost 70 of
    retail sales
  • Yet, some small retailers control "their" market
  • Larger stores enjoy economies of scale
  • Corporate chain stores also enjoy economies of
  • Account for about half of all retail sales (and
    much higher in some product categories)
  • Continuing to grow
  • Independent retailers form chains
  • Cooperative chains are retailer sponsored
  • Voluntary chains are wholesaler sponsored

Retailing and the Internet
  • Growing fast, but still in very early stages
  • Convenience not defined by location of product
  • More information of some types but not others
  • More technical detail
  • Less touch and feel
  • Generally requires more advance planning
  • Delivery takes time and adds costs
  • Competitive effects impact other retailers
  • New types of specialists and intermediaries will
    continue to develop

Mass-Merchandising Concept
  • Retailers should offer low prices to get faster
    turnover and greater sales volumeby appealing to
    larger markets
  • Started with supermarkets in 1930s
  • Really caught on with mass-merchandisers
  • large stores
  • self-service oriented
  • Examples Wal-Mart, Target
  • Competition among mass-merchandisers has heated
  • Limited-line mass-merchandisers (category
    killers) grew rapidly, but growth has subsided

Examples of Scrambled Merchandising
  • Videotapes and DVDs at grocery stores
  • Microwave popcorn at video rental stores
  • Computer software at bookstores
  • Clothing and fashion accessories at a motorcycle
  • One-hour prints from digital pictures at

An Example of a Large Retail Chain
Levels of Retail Service
  • Self servicemany customers will to
    locate-compare-select process to save money
  • Self selectioncustomers find their own goods,
    although they can ask for assistance
  • Limited serviceretailers carry more shopping
    goods and services such as credit and
    merchandise-return privileges
  • Full servicesalespeople are ready to assist in
    every phase of the locate-compare-select process

Nonstore Retailing
  • Direct selling multilevel selling and network
    marketing selling door-to-door, or at home sales
  • Direct marketing direct mail, catalog marketing,
    telemarketing, television direct-response
    marketing, electronic shopping
  • Automatic vending variety of merchandise,
    impulse goods, hosiery, cosmetics, hot food, etc.
  • Buying service storeless retailer servicing a
    specific clienteleusually employees of a large
    organizationwho are entitled to buy from a list
    of retailers that have agreed to give discounts
    in return for membership

Major Types of Corporate Retail Organizations
  • Corporate chain store two or more outlets owned
    and controlled, employing central buying and
    merchandising, and selling similar lines of
    merchandise (GAP)
  • Voluntary chain wholesaler-sponsored group of
    independent retailers engaged in bulk buying and
    common merchandising (Independent Grocers
  • Retailer cooperative independent retailers using
    a central buying organization and joint promotion
    efforts (ACE Hardware)
  • Consumer cooperative retail firm owned by its
    customers. Members contribute money to open
    their own store, vote on its policies, elect a
    group to manage it, and receive dividends
  • Franchise organization contractual association
    between a franchisor and franchisees (McDonalds)
  • Merchandising conglomerate corporation that
    combines several diversified retailing lines and
    forms under central ownership, with some
    integration of distribution and management
    (Allied Domeq PLC with Dunkin Donuts and
    Baskin-Robbins, plus a number of British
    retailers and a wine and spirits group

Department Store Model The Showcase Store
What is a Franchising System?
  • A franchising system is a system of individual
    franchisees, a tightly knit group of enterprises
    whose systematic operations are planned,
    directed, and controlled by the operations

Franchise Operations
  • The franchiser develops a good marketing strategy
    and the retail franchise holders carry out the
    strategy in their own units.
  • Strong legal contracts govern the relationship.
  • Franchisers have been successful with newcomers.
  • especially popular with service operations
  • Franchise sales account for about half of all
    retail sales.

Characteristics of Franchises
  • The franchisor owns a trade or service mark and
    licenses it to franchisees in return for royalty
  • The franchisee pays for the right to be part of
    the system
  • The franchisor provides its franchisees with a
    system for doing business

Changes in the Retail Environment
  • New retail forms and combinations
  • Growth of intertype competition
  • Competition between store-based and
    non-store-based retailing
  • Growth of giant retailers
  • Decline of middle market retailers
  • Growing investment in technology
  • Global profile of major retailers

New Retail Forms and Combinations
  • Combination retailerssome supermarkets includes
    bank branches bookstore feature coffee shops,
  • Pop-ups lt retailers promote brands, reach
    seasonal shoppers for a few weeks in busy areas
    and create buzz (JC Penney unveiled designer
    Chris Maddens home, bath, and kitchen line in a
    2,500-square-foot Rockefeller Center space for
    one month only.
  • Showcase storesSome stores not only sell other
    companies brands but get the vendors of the
    brands to take responsibility for stock, staff,
    and even the selling space. The vendors then
    hand over a percentage of the sales to the
    stores owner

Retailers Marketing Decisions
  • Target marketprofile of customer
  • Product assortmentbreadth and depth
  • Procurementmerchandise sources
  • Pricesdecided in relation to the target market
  • Servicespre-purchase, post-purchase, ancillary

Retailers Marketing Decisions (cont.)
  • Store atmosphere
  • Store activitiesbrick-and-mortar and e-commerce
  • Communicationsadvertisement, special sale,
    money-saving coupons, etc.
  • Locations

Store Atmosphere
  • Walls
  • Lighting
  • Signage
  • Product placement
  • Floors
  • Surface space
  • Music

Retail Category Management
Define the category
Figure out its role
Assess performance
Set goals
Choose the audience
Figure out tactics
Implement the plan
Retailer Services Mix
  • Pre-purchase services accepting telephone and
    mail orders, advertising, window and interior
    display, fitting rooms, shopping hours, fashion
    shows, and trade-ins
  • Post-purchase services shipping and delivery,
    gift wrapping, adjustments and returns,
    alterations and tailoring, installations
  • Ancillary services general information, check
    cashing, parking, restaurants, repairs, interior
    decorating, credit, rest rooms, and
    baby-attendant service

Location Decision
  • General business districtsdowntown
  • Regional shopping centerslarge suburban malls
    containing 40 to 200 stores, typically featuring
    one or two nationally known anchor store, such as
    JC Penney or Lord Taylor
  • Community shopping centerssmaller malls with one
    anchor store and between 20 and 40 smaller stores
  • Strip malls stripscluster of stores, usually
    housed in one long building, serving a
    neighborhoods needs for groceries, hardware,
    laundry, shoe repair, and dry cleaning
  • Location within a larger storecertain well-known
    retailersMcDonalds, Starbucks, Nathans,
    Dunkin Donutslocate new, smaller units as
    concession space within larger stores or
    operations, such as airports, schools, or
    department stores

Tips for Increasing Sales in Retail Space
  • Keep shoppers in the store
  • Dont make them hunt
  • Make merchandise available to the reach and touch
  • Note that men do not ask questions
  • Remember women need space
  • Make checkout easy

Indicators of Sales Effectiveness
Number of people passing by
who enter store
of those who buy
Average amount spent per sale
Trends in Retailing
  • New retail forms and combinations
  • Competition between store-based and
    non-store-based retailing
  • Growth of giant retailers
  • Decline of middle market retailers
  • Growing investment in technology
  • Global presence of major retailers

Some Trends in Retailing
  • Growth of Internet merchants and online retailing
  • Electronic retailing (kiosks, TV, etc.)
  • In-home shopping (catalogs, etc.)
  • More price competition
  • Vertical integration
  • More chains and franchises
  • chains becoming larger, more powerful
  • More and better information (for example, scanner

Private Label Brands
  • Private labels (reseller, store, house, or
    distributor brand) is a brand that retailers and
    wholesalers develop are ubiquitous
  • Consumer accepts private labels
  • Private-label buyers come from all socioeconomic
  • Private labels are not a recessionary phenomenon
  • Consumer loyalty shifts from manufacturers to

Private Labels
Wholesaling Functions
  • Transportationprovide quicker delivery to buyers
    because they are closer to the buyers
  • Financinggrant credit, and finance suppliers by
    ordering early and paying bills on time
  • Risk bearingabsorb some risk by taking title and
    bearing cost of theft, damage, spoilage, and
  • Market informationsupply competitor activities,
    new products, price developments, etc
  • Management services and counselingtraining sales
    clerks, helping with store layouts and displays,
  • Selling and promotingsales force help
    manufacturers reach many small business customers
    at a relatively low cost
  • Buying and assortment buildingselect items and
    build the assortment their customers need
  • Bulk breakingbuy large carload lots and breaking
    the bulk into smaller units
  • Warehousinghold inventories, and reduce
    inventory costs and risks to suppliers and

Wholesalers Marketing Decisions
Target market
Product assortment
What a Wholesaler Might Do for Customers
  • Regroup productsto provide quantity and
    assortment customers need
  • Anticipate customers' needsand buy accordingly
  • Carry products in inventorywhich helps reduce
    customers' inventory costs
  • Deliver products promptly and economically
  • Grant credit
  • Provide information and advice
  • Provide part of the buying functionmake it easy
    for customers to buy what they want

What a Wholesaler Might Do for Producer-Suppliers
  • Provide part of the selling function
  • Store inventory (cut producer's warehousing
  • Supply capital (by purchasing producer's output
    before it is sold to final customers)
  • Reduce credit risks
  • Provide marketing information

Manufacturers Sales Branches
  • Separate business that producers set up away from
    their factories to handle wholesaling functions.
  • Represent only about 4.3 percent of all
  • Handle 28.4 percent of total wholesale sales
  • Sales high because they are placed in best
  • True operating costs may be difficult to determine

Types of Wholesalers
U.S. Wholesale Trade by Type of Wholesale
Major Wholesaler Types
Brokers and agents
Merchant Wholesalers
  • Take title to (own) the products they sell
  • About 88.3 of wholesalers are merchant
  • Handle about 61.2 of total wholesale sales
  • Two basic types
  • Full-service wholesalers
  • Limited-function wholesalers

Full-Service Merchant Wholesalers
  • Provide all of the wholesaling functions
  • Three major types
  • General merchandise wholesalers
  • Single-line (or general-line) wholesalers
  • Specialty wholesalers

Some Limited-Function Merchant Wholesalers
  • Cash and carry wholesalersoperates like service
    customers except must pay cash
  • Drop-shipperstake title to products they sell
    but do not stock or deliver them
  • Truck wholesalerstypically deliver perishable
  • Rack jobbersusually display products on their
    own racks
  • Catalog wholesalerssell out of catalogs

Agent Middlemen Are Strong on Selling
Manufacturers Agents
Types of Agent Middlemen
Selling Agents
Manufacturers Agents
  • Sell similar products for several noncompeting
  • Work on a commission basis
  • Basically are independent, aggressive sales reps
  • Especially helpful to small producers and
    producers whose customers are very spread out

  • Main purpose is to bring buyers and sellers
  • Usually have a temporary relationship with buyer
    and seller while the deal is negotiated
  • Earn a commissionfrom either the buyer or
    sellerdepending on who hired them
  • Especially common with seasonal products and
    products sold infrequently

Agent Middlemen
  • Wholesalers who do not own the products they sell
  • Main purpose is to help with buying and selling
  • Usually operate at relatively low cost
  • Usually provide fewer functions than merchant
  • Often specialize not only by product-type, but
    also by customer type

Trends in Wholesaling
  • Fewer, but larger, wholesalers
  • Use of computers to control inventory, order
  • Closer relationships with customers
  • More selective in picking customers

Market Logistics Planning
  • Deciding on the companys value proposition to
    its customers
  • Deciding on the best channel design and network
  • Developing operational excellence
  • Implementing the solution

What are Integrated Logistics Systems?
  • An integrated logistics system (ILS) includes
    materials management, material flow systems, and
    physical distribution, aided by information

Market Logistics
  • Sales forecasting
  • Distribution scheduling
  • Production plans
  • Finished-goods inventory decisions
  • Packaging
  • In-plant warehousing
  • Shipping-room processing
  • Outbound transportation
  • Field warehousing
  • Customer delivery and servicing

Market Logistics Decisions
  • How should orders be handled?
  • Where should stock be located?
  • How much stock should be held?
  • How should goods be shipped?

Determining Optimal Order Quantity
Transportation Factors
  • Speed
  • Frequency
  • Dependability
  • Capability
  • Availability
  • Traceability
  • Cost

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