Chapter Eleven

1. Chapter Eleven Retailing and Wholesaling

2. What Is Retailing? • Retailing: • includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. • Most retailing is done by retailers, but nonstore retailing has recently grown by leaps and bounds. Copyright 2007, Prentice Hall, Inc.

3. Types of Retailers • Retailers are classified based on: • Amount of service they offer • Breadth and depth of product lines • Relative prices charged • How they are organized Copyright 2007, Prentice Hall, Inc.

4. 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 like to be “waited on.” Copyright 2007, Prentice Hall, Inc.

5. Major Store Retailer Types • See table 11-1 • Specialty stores • Limited product line, but an unique assortment, usually smaller stores with a distribution “personality”. Knowledgeable sales clerks, and good service…Helzberg. • Department stores • Large stores, many separate departments, each with limited product lines. Usually strong in customer service-credit, merchandise return, delivery, and sales consistence… Jones Store, Dillard, Halls Crown Center, JC Penney. • Supermarkets • Category Killers Copyright 2007, Prentice Hall, Inc.

6. Major Store Retailer Types • Supermarkets • Large stores specializing in groceries, primarily self-service with wide assortments. Profits come from volume, most from high markup. • Category Killers • Giant specialty stores that carry deep assortments of particular lines of a wide range of category: books, baby gear, toys, home improvement… Home Depot, Lowes • Convenience stores • Limited lines of high-turnover convenience goods, gasoline, tobacco, beverages, and snack items… Quick Trip, Conoco convenience store • Superstores • Large stores that sell large assortments of routinely sold food products, non-food products, and services Copyright 2007, Prentice Hall, Inc.

7. Relative Prices Classification • See table 11-1. • Most retailers charge “regular”/”average” prices for average quality and service. Increases in either or both will usually increase retail prices accordingly. • Discount stores • Sell standard merchandise at lower prices by accepting lower cost form manufactures and selling at lower margins at higher volumes… Wal-Mart, Target, Kmart, and Circuit City. Copyright 2007, Prentice Hall, Inc.

8. Relative Prices Classification • Off-price retailers • Independent off-price retailers • Buy at less then regular wholesale prices and less then normal retail or by divisions of large retail corporations… TJ Maxx, Half Price Stores, and Marshalls • Factory outlets • Producer operated stores… Liz Claiborne, Carters, Levi Strauss • Factory outlet malls • Value-retail centers May be clearance outlets selling out of style, overstock merchandise. Many mall outlets are combined manufacturer/retailer stores. Department store outlets of specialty goods naturally charge higher prices. Outlet brands include Nordstrom, Neiman Marcus, Saks, Fifth Avenue, Coach, Polo, Ralph Lauren, Gucci, Georgia Armani Copyright 2007, Prentice Hall, Inc.

9. Relative Prices Classification • Warehouse club • Appeal to variety of customer types, with large variety of products from food to furniture to appliances. Usually have deep discounts and a variety of marketing mixes… Sam’s Club, Costco Copyright 2007, Prentice Hall, Inc.

10. Organizational Classification • Corporate chain stores • Owned and operated, usually with central buying similar lines of merchandise… Sears, CVS, Williams-Sonoma, Tower Records, Pottery Barn. • Voluntary chain • Wholesaler-sponsored groups of independent retailers engaged in bulk buying and common merchandising… IGA, Sentry Hardware, True Value Hardware. Copyright 2007, Prentice Hall, Inc.

11. Organizational Classification • Retailer cooperative • Groups of independent retailers who set up a central buying organization and conduct joint promotional efforts…. Associated Grocers, Ace Hardware. • Franchise • Contractional relationship between a manufacturer, wholesaler, or service and a retailer which buys the right to one or more “franchise”… owner may be manufacturer, wholesaler or service… McDonalds, Pizza Hut, Jiffy Lube • Merchandising conglomerates • Corporate entities that own, run, and manage several widely diverse/different (product or service) franchises, along with some integration of their distribution and management functions… Target Corporation. Copyright 2007, Prentice Hall, Inc.

12. Retailer Marketing Decisions • Retailer Strategy: • Target market • Retail store positioning • Until retailers define and profile their markets, retailers cannot make meaningful decisions related to the retailer marketing mix. Copyright 2007, Prentice Hall, Inc.

13. Retailer Marketing Decisions • Retailer Marketing Mix: • Product assortment and services • Price • Promotion • Place (location) Copyright 2007, Prentice Hall, Inc.

14. Assortment and Service Decisions • Product assortment • Should differentiate the retailer while matching target shoppers’ expectations • Services mix • Store atmosphere • Physical layout can help/hinder shopping • Experiential retailing helps sell goods • Unusual, exciting shopping environments are becoming more common Copyright 2007, Prentice Hall, Inc.

15. Price and Promotion Decisions • Price policy must fit its target market and positioning, product and service assortment, and competition. • Can use any or all of the promotion tools—advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers. Copyright 2007, Prentice Hall, Inc.

16. Place Decisions • Retailers can locate in central business districts, various types of shopping centers, strip malls, or power centers. • Location is key to success. Copyright 2007, Prentice Hall, Inc.

17. New Retail Forms and Shortening Retail Life Cycles Growth of Nonstore Retailing Retail Convergence Rise of the Megaretailers Growing Importance of Retail Technology Global Expansion of Major Retailers Retail Stores as “Communities” or “Hangouts” The Future of Retailing Copyright 2007, Prentice Hall, Inc.

18. Wholesaling • Wholesaling: • 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. Copyright 2007, Prentice Hall, Inc.

19. Financing Risk bearing Market information Management services and advice Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Functions Provided by Wholesalers Copyright 2007, Prentice Hall, Inc.

20. Types of Wholesalers • Merchant Wholesalers • Largest group of wholesalers • Account for 50% of wholesaling • Two broad categories: • Full-service wholesalers • Limited-service wholesalers Copyright 2007, Prentice Hall, Inc.

21. Types of Wholesalers • Brokers and Agents • Do not take title to goods • Perform fewer functions • Brokers bring buyers and sellers together • Agents represent buyers on more permanent basis • Manufacturers’ agents are most common type of agent wholesaler Copyright 2007, Prentice Hall, Inc.

22. Types of Wholesalers • Manufacturers’ Sales Branches and Offices • Wholesaling by sellers or buyers themselves rather than through independent wholesalers. Copyright 2007, Prentice Hall, Inc.

23. Wholesaler Marketing Decisions • Wholesaler Strategy: • Target market • Service positioning • Wholesaler Marketing Mix: • Product assortment and services • Price • Promotion • Place (location) Copyright 2007, Prentice Hall, Inc.

24. Trends 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 is blurry. • Will continue to increase the services provided to retailers. • Wholesalers are now going global. Copyright 2007, Prentice Hall, Inc.

25. Whole Foods Market Has 170 stores worldwide with $4 billion in sales vs. 5000 stores and sales of $285 billion for Wal-Mart. Offers organic, natural, and gourmet foods. Positions itself AWAY from Wal-Mart: “Whole Foods, Whole People, Whole Planet.” Marketing Efforts Web site reinforces the company’s positioning. Caters to health conscious, affluent, liberal, educated consumer base. Both in-store and online shopping is a customer experience. Cares about employees, customers, & community. Case Study Whole Foods Market – Finding Its Niche Copyright 2007, Prentice Hall, Inc.