prentice hall, copyright 2009 retailing and wholesaling chapter 11 next exit

Retailing Retailing andand

WholesalingWholesaling

Chapter 11Next Exit

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11-2Prentice Hall, Copyright 2009

Rest Stop:Rest Stop: Previewing the ConceptsPreviewing the Concepts

1. Explain the roles of retailers and wholesalers in the distribution channel.

2. Describe the major types of retailers and give examples of each.

3. Describe the major types of wholesalers and give examples of each.

4. Explain the marketing decisions facing retailers and wholesalers.


Costco Background

Costco warehouse club outsells Wal-Mart’s Sam’s Club by 50% despite having 50 fewer stores.

Sales have surged 55%, profits 57%, over the last 4 years.

Similar to Sam’s Club, Costco offers limited selection of national and private-label brands at low prices to members.

Costs are kept low; Costco refuses to mark up any item more than 14%. Operating margins average only 2.8%.

Costco –Costco – Beating Wal-Mart at its Own GameBeating Wal-Mart at its Own GameCase StudyCase Study

Why Costco is SucceedingCostco is a “theatre of retail that

creates buying urgency and excitement for customers.”

Costco carries a changing assortment of high quality goods and luxury items such as Prada bags and Callaway golf clubs.

Stores are located in more affluent areas than are Sam’s Clubs, and draw higher income customers.

The Kirkland signature store brand provides a quality offering for a wide range of goods.


RetailingRetailing

Retailing includes all the activities involved in selling goods or services directly to

final consumers for their personal, non-business use.


RetailingRetailing

Most retailing is done by retailers, businesses, whose revenues come primarily from retailing.

Retailers generate in excess of $4.3 trillion in sales annually.

Nonstore retailing has recently grown by leaps and bounds.


Types of RetailersTypes of Retailers

The different types of retailers can be classified based on:– The amount of service they offer.

– The breadth and depth of product lines.

– The relative prices charged.

– How they are organized.



Classification by the amount of service:– Self-service retailers serve customers who

are willing to perform their own “locate-compare-select” process to save money.

– Limited-service retailers provide more sales assistance because they carry more shopping goods about which customers need information.

– Full-service retailers usually carry more specialty goods for which customers need or want assistance or advice.



Specialty stores

Department stores

Supermarkets

Convenience stores

Superstores Service retailers

Retail classifications by product line:


Upscale Supermarkets

Many supermarkets are moving upscale. Safeway is converting to “lifestyle” stores, supported by a big-budget “ingredients for life” marketing campaign.

Marketing in Action



Relative prices classification:– Discount stores

– Off-price retailers:• Independent off-price retailers

•Factory outlets:– Factory outlet malls– Value-retail centers

•Warehouse clubs


Wal-Mart Rules the Discounters

Wal-Mart’s low-price value proposition has helped make them the world’s largest retailer. Sales of toys

and pet supplies top those of category killers.

Marketing in Action



Organizational classification:– Corporate chain stores

– Voluntary chain

– Retailer cooperative

– Franchise

– Merchandising conglomerates

Prentice Hall, Copyright 2009 11-13

Figure 11.1Figure 11.1Retailer Marketing StrategyRetailer Marketing Strategy


Retailer Marketing DecisionsRetailer Marketing Decisions

Retailer Strategy:– Segmentation and targeting

– Store differentiation and positioning

– Retail marketing mix•Retailers cannot make meaningful

decisions related to the retail marketing mix until they first define and profile their target market.


Positioning Whole Foods Market

Whole Foods Market targets a select group of upscale customers and offers them “organic, natural, and

gourmet foods, all swaddled in Earth Day politics.”

Marketing in Action



Retailer marketing mix:– Product and service assortment– Retail prices– Promotion– Distribution (location)

The retail strategy and retail marketing mix must combine to create value for targeted retail customers.


Retail marketing mix:– Product assortment should differentiate

the retailer while matching target shoppers’ expectations.

– Services mix can help differentiate one retailer from another (e.g., Home Depot’s “How-to” classes for do-it-yourselfers).



Retail marketing mix:– Store atmosphere is important as:

•The physical layout can help or hinder shopping

•Experiential retailing helps sell goods

•Unusual, exciting shopping environments are becoming more common



Positioning Whole Foods Market

Successful retailers orchestrate every aspect of the store atmosphere and experience.

Sony Style carefully controls the music, lighting, colors, and even the smells (vanilla and mandarin orange).

Marketing in Action



Price decisions:– The price policy

must fit with the target market and positioning, the product and service assortment, and the competition.



Promotion decisions:– Retailers can use any or

all of the promotion tools—advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers.



Distribution decisions:– Location is the key to success.

– Retailers can locate in: •Central business districts

•Various types of shopping centers

•Strip malls

•Power centers

•Lifestyle centers


The Future of RetailingThe Future of Retailing

1. New retail forms and shortening retail life cycles

2. Nonstore retailing growth

3. Retail convergence

4. Rise of the megaretailers

5. Growing importance of retail technology

6. Global expansion of major retailers

7. Retail stores as “communities” or “hangouts”


Lifestyle Centers

The current trend in retailing is toward either large “power centers” (huge unenclosed shopping malls) or “lifestyle centers” (smaller malls with upscale stores and nonretail activities such as dining and a movie

theatre in affluent areas), or a hybrid of both.

Marketing in Action


Fuel for ThoughtFuel for Thought

Many retail stores are becoming “communities” or “hangouts” either in the brick-and-mortar or virtual worlds.

What can retailers do to make their brick-and-mortar stores “community friendly”?

Are there circumstances in which it would be undesirable to encourage patrons to “hang-out”? Explain.



Includes all activities involved in selling goods and services to those buying for resale or

business use.



Wholesalers add value for producers by performing one or more channel functions.



Financing Risk bearing Market

information Management

services and advice

Selling and promoting

Buying and assortment building

Bulk-breaking Warehousing Transportation

Functions performed by wholesalers:


Types of WholesalersTypes of Wholesalers

Merchant wholesalers:– Largest group of wholesalers

– Account for 50% of wholesaling

– Two broad categories:•Full-service wholesalers

•Limited-service wholesalers



Full-service wholesalers:– Wholesale merchants– Industrial distributors

Limited-service wholesalers:– Cash-and-carry wholesalers– Truck wholesalers– Drop shippers– Producer’s cooperatives– Mail-order wholesalers



Brokers and agents:– Do not take title

to goods– Perform only a

few functions– Specialize by

product line or customer type



Brokers bring buyers and sellers together.

Agents represent buyers on a more permanent basis.– Manufacturers’ agents– Selling agents– Purchasing agents– Commission merchants.



Manufacturers’ sales branches and offices:– Involves wholesaling by sellers or

buyers themselves rather than through

independent wholesalers.

Prentice Hall, Copyright 2009 11-34

Figure 11.2Figure 11.2Wholesaler Marketing StrategyWholesaler Marketing Strategy


Trends in WholesalingTrends in Wholesaling

Fierce resistance to price increases. Winnowing out of suppliers who are

not adding value based on cost and quality.

Distinction between large retailers and wholesalers continues to blur.

Wholesalers will continue to increase the services provided to retailers.

Wholesalers are now going global.

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Rest Stop:Rest Stop: Reviewing the ConceptsReviewing the Concepts

1. Explain the roles of retailers and wholesalers in the distribution channel.

2. Describe the major types of retailers and give examples of each.

3. Describe the major types of wholesalers and give examples of each.

4. Explain the marketing decisions facing retailers and wholesalers.

37


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mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

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