chapter 15 managing retailing, wholesaling and logistics

Managing Retailing, Wholesaling, and Logistics

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Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16-2

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 intermediaries?


What is Retailing?

Retailing includes all the activities involved in selling goods or services

directly to final consumers for personal, nonbusiness use.

Major Retailer Types

• Specialty store : Narrow product line

• Department store : Several product line

• Supermarket : Large, low margin, high volume, self service store designed to meet total needs for food and household products . For eg HyperCity

• Convenience store: Small store in residential area


Retail Management 5

Examples: Specialty Store

• Reliance Retail Limited (RRL) announced the launch of a new specialty store "Reliance TimeOut" on Cunningham Road in Bangalore. This store houses Books, Music, Stationery, Toys and Gifts.

• Cross word• Ethnicity• Reliance Foot Prints

Retail Management 6

Department Stores

• Department stores are large retail units that offer wide variety and a deep assortment of goods and services.

• Organized into separate departments

• Provide a one-stop shopping experience to customers.

• Piramyd Megastore , Pantaloon , shopper's stop , Lifestyle , Westside

Retail Management 7

BPCL's 'In & Out' convenience stores

• BPCL “In & Out” convenience stores across India

• “Petrol retail outlets provide the right framework for setting up convenience retail chains where the consumer has the opportunity of combining shopping with fuelling

• Air Deccan tickets available at BPCL's 'In & Out' convenience stores

Major Retailer Types

• Drug Store : Prescription and pharmacies, health and beauty aids, other personal care , small durable, etc

• Discount store : Standard or specialty merchandise, low price, low margin, high volume stores

• Off-price retailer: Leftover goods, irregular merchandise sold at less than retail. For eg. Factory Outlets

• Catalog showroom



Nonstore Retailing

Direct

Selling For eg. Tupperware

Buying Service Store less retailer serving a specific clientele

Automatic

vending

Direct

MarketingIncludes telemarketing, TV direct response marketing,

electronic shopping


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. For eg. Reliance Mart

• Retailer cooperative• Consumer cooperative: A retail form owned by its customers.

Members contribute money to open their own store• Franchise organization: Contractual association between a

franchisor and franchisees For Eg McDonalds, Subway, Pizza Hut

• Merchandising conglomerate: A corporation that combines several diversified retailing lines and forms sunder central ownership, with some integration of distribution and management. For eg. Future Group

Retail Management 11

National Cooperative Consumers Federation of India Limited (NCCF)

• The consumer cooperative structure in the country has four tiers,

with the National Cooperative Consumers Federation of India Limited (NCCF) at the national level. Thirty State Cooperative Consumers Organisations are affiliated to the NCCF.

• At the Central/Wholesale level, there are 800 Consumer Cooperative Stores. At the primary level, there are 25,759 primary stores. In the rural areas, there are about 44,418-village level Primary Agricultural Credit Societies and Marketing Societies undertaking the distribution of consumer goods along with their normal business.

• In the urban and semi-urban areas the consumer cooperative societies are operating about 37,226 retail outlets to meet the requirements of the consumers.

• The NCCF with its Head Office at New Delhi has 32 branches/sub-branches located in various parts of the country.


Procurement Procedures of the NCCF

• Groceries The items like Toor Whole, Gram, Masoor, Jeera, Saunf, Methi, Mustard etc. are procured from the procuring centers from the regulated mandis during the Kharif/Rabi seasons and stored in CWC/ State Warehouses. These stocks are offered to Co-operatives/ indenting institutions during lean season in order to maintain the supply line and sustain the escalation of the rates in market for benefit of consumers.

• Gen. MerchandiseStationery and office equipments for supply to the Govt. departments, iIodised salt ,Tea and Other manufactured consumer goods.

• TextilesThe textile items such as cotton cloth, carpets, bedlinens, towels, uniform cloth etc. are purchased from the mills and their distributors by entering into specific agreements with them for supply in bulk to user cooperatives and Government organisations.

• Levy Sugar The Levy Sugar is procured and distributed in three districts of Delhi as per the approved scheme of the Government of NCT Delhi.

• Fertilizers NCCF has been nominated as one of the agency for undertaking distribution of fertilizer products of IFFCO for the benefit of the farmer community.


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 operation’s franchisor.


Characteristics of Franchises

• The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments

• The franchisee pays for the right to be part of the system

• The franchisor provides its franchisees with a system for doing business


McDonald’s Franchisee Development Program

• Initial fee, Ongoing monthly fee based on restaurant's sales and specified % of gross sales for marketing efforts

• Training at Hamburger University• Program includes : Restaurant orientation, Basic

Operation Course, hands on restaurant training, Basic Management, Intermediate operation course, Restaurant training, advanced operations


Changes in the Retail Environment

• New retail forms and combinations• Growth of intertype competition (discount stores v/s

departments stores)• Competition between store-based and non-store-based

retailing• Growth of giant retailers• Decline of middle market retailers• Growing investment in technology ( In-store programming on

TV, GPS on Shopping Carts, Electronic Shelf Labeling, “Smart” Shopping Carts)

• Global profile of major retailers• Growth of Shopper Marketing ( For eg. In- store advertising)


Retailers’ Marketing Decisions

Target market

Product assortment

Procurement

Prices

Services

Channels

Procurement

• The use of RFIDs (radio Frequency Identification) has been steadily increasing

• Coco Cola and Gillette use them to monitor and track goods in real time as they move from factories to supermarkets to shopping baskets.


Channels

• Fab India has a dedicated institutional sales team of professionals to handle product customization and interior consulting for heritage hotels, resorts and business houses

• It continues to export home linen as well as garments to wholesalers and retailers in over 33 countries

• During last 50 years it has expanded its product range to include garment accessories, home furnishings, non textile products, organic foods and personal care products; in addition to garments



Services

Prepurchase services

Postpurchase services

Ancillary services

Services

• Pre purchase services : telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows

• Post purchase services: Shipping and delivery, gift wrapping, adjustments and returns, alterations and tailoring, installations, engraving

• Ancillary Services: General information, Parking, Restaurants, Repairs, Interior decorating, credit, rest rooms, baby attendant services



Retailers’ Marketing Decisions (cont.)

Store atmosphere

Store activities

Communications

Locations


Store Atmosphere

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


Location Decision

• Central business districts

• Regional shopping centers

• Community shopping centers

• Shopping strips

• Location within a larger store

• Stand alone store


Location Decision

• Central business districts : Oldest and most heavily trafficked city areas. Bangalore Central Business District (UB Tower), Connaught Place New Delhi

• Regional shopping centers : Large suburban malls containing 40 to 60 stores, with a few well known chains like McD, Westside, FabIndia and number of clothing, footwear, linen and consumer electronic stores

• Community shopping centers : Smaller malls with one anchor store and 20 to 40 smaller store

• Shopping strips : A cluster of stores, usually in one long building, serving a neighborhood's needs for groceries, hardware, laundry, shoe repair , dry cleaning

• Location within a larger store: Well known retailers locate new, smaller units as concession space within larger stores or operations such as airports, schools, or department stores

• Stand alone stores: Some retailers avoid malls and shopping centers to locate new stores in free standing sites on streets,


Private Label Brands

• Private labels are ubiquitous• Consumers accepts private labels• Private-label buyers come from all

socioeconomic strata• Private labels are not a recessionary

phenomenon• Consumer loyalty shifts from manufacturers

to retailers


Wholesaling Functions

• Selling and promoting

• Buying and assortment building

• Bulk breaking• Warehousing

• Transportation• Financing• Risk bearing• Market information• Management

services and counseling


Major Wholesaler Types

Merchant

Full-service

Limited-service

Brokers and agents

Manufacturers and retailer’s branches and offices

Specialized wholesalers

Major Wholesaler Types

• Merchant: Independently owned business that take title to the merchandise they handle

• Full-service :Carry stock, maintain a sales force, offer credit, make deliveries, provide management assistance

• Limited-service :Cash and Carry wholesalers, Truck wholesalers, Drop shippers, Rack Jobbers, Producers cooperatives, Mail order Wholesalers

• Brokers and agents• Manufacturers and retailer’s branches and offices• Specialized wholesalers: Agricultural assemblers (buy the

agricultural output of many farms), petroleum bulk plants and terminals (consolidate the output of many wells)



What are Integrated Logistics Systems?

An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution,

aided by information technology.

Market Logistics• Johnson & Johnson switched to Forest Stewardship Council (FSC)-

certified paperboard for its BAND-AID brand boxes.• J& J and its operating companies are positioned to make paper and

packaging procurement decisions that could help influence responsible forest management.



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

• Xerox developed a service delivery standard that “can put a disabled machine anywhere in the continental United States back into operation within 3 hours after receiving the service request.


Market Logistics

• Coca Cola wants “to put Coke within an arm’s length of desire”.

• Lands’ End , the giant clothing retailer, aims to respond to every phone call within 20 seconds and to ship every order

within 24 hours of receipt.



Market Logistics Decisions

1. How should orders be handled?: Order Processing

2. Where should stock be located? : Warehousing

3. How much stock should be held? : Inventory

4. How should goods be shipped?: Transportation

Warehousing

• Consumer packaged goods companies have been reducing their number of stocking locations from 10 to 15 to about 5 to 7

• Pharma and Medical distributors have cut theirs from 90 to about 45

• More stocking locations mean goods can be delivered to customers more quickly , but warehousing and inventory costs are higher


Inventory

• Reorder Point : At what stock level to place a new order

• Order Processing Cost

• Inventory Carrying Cost

• Near Zero Inventory


Near Zero Inventory

• Near Zero Inventory : Build for order, not for stocks • Sony calls it SOMO “Sell one, make one”.• Dells’ inventory strategy for years has been to get

the customer to order a computer and pay for it in advance. Then Dell uses the customer’s money to pay suppliers to ship the necessary components.



Transportation Factors

• Speed• Frequency• Dependability• Capability• Availability• Traceability• Cost

Transportation

• Containerization : Putting the goods in boxes or trailers that are easy to transfer between two transportation modes.

• Piggyback : Use of Rail and Trucks

• Fishyback : Use of Water and Trucks

• Trainship : Use of Water and Rail

• Airtruck: Use of Air and truck


Piggyback


ZARA - CASELET


chapter 15 managing retailing, wholesaling and logistics

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