CHAPTER 11. Retailing and Wholesaling

Transcription

1 CHAPTER 11 Retailing and Wholesaling

2 Retailing Retailing can be defined as all of the activities involved in the sale of goods and services to the ultimate consumer. Although most retail sales happens in retail stores, the definition of retailing also includes orders placed at home on a computer, telephone, mail order, vending machines, and direct selling. Retailers are both customers and marketers in the channel of distribution. They market products to the ultimate consumer and are customers of wholesales and producers.

3 Retailing The Wheel of Retailing tries to explain the patterns of changes that happen in retailing. The hypothesis behind the wheel of retailing is that new types of retailers gain a competitive foothold in the market by offering lower prices through reduction or elimination of services. Once established, the retailer adds more services and prices gradually begin to increase. Then the retailer becomes vulnerable to new low priced retailers offering minimum services entering the market. The retail cycle has finished thus resembling a wheel turning. The next slide illustrates the point.

4 The Wheel of Retailing 4. New Outlet Enters 1. Retail Outlet Starts Low Price Limited Service 3. Retail Outlet Higher Prices Higher Status Passage Of Time Low Price Limited Service Out-of-way Location 2. Retail Outlet Adds Service Raises Prices Better Location

5 Major Store Retailer Types Type Type description Specialty store Carries a narrow product line with a deep assortment Department store Carries several product lines Each line is operated as a separate department Supermarket Large, low-cost, low-margin, high-volume, self-service operation Convenience store Carries a limited line of high-turnover convenience products at slightly higher prices Discount store Sells goods at lower prices with lower margins and higher volumes Off-price retailer Sells merchandise bought at less-than-regular wholesale prices and sold at less than retail Superstore Very large store for routinely purchased items

6 Types of Retailers Retailer classification can be based on: Amount of service offered Breadth and depth of the product lines Relative prices charged Way they are organized

7 Retailer Classification A retailer can provide consumers with different types of customer service. Self Service Retailers require the consumer to perform many shopping activities during the purchase process. Limited Service Retailers provide some services. Consumers are responsible for most shopping activities, but salespeople are available in departments such as lawn and garden, electronics, and jewelry. Full Service Retailers provide many or wide range of services to the consumer.

8 Retailer Classification Retailers vary by their product lines. Depth of Product Line means the retailer carries a large assortment of each product item. Breadth of Product Line means the retailer offers a variety of different product lines.

9 Retailer Classification by Organizational Approach Type Corporate chain Voluntary chain Retailer cooperative Franchise organization Description Two or more outlets that are commonly owned and controlled Independent retailers engaged in group buying and merchandising Sponsored by wholesaler Group of independent retailers who jointly establish a central buying organization and conduct joint promotion efforts Contractual association between a franchisor and franchisees

10 Retailing Over the years, classifying retailers has gradually become more difficult because of a concept called Scrambled Merchandising, which is the retail practice of carrying dissimilar lines of products in the attempt to generate additional sales. For example, not only do drugstores carry drugs for prescriptions, but also garden supplies, gift items, groceries, hardware, housewares, magazines, music, videos, and small appliances, etc..

11 Retail Design In product strategy, consumer goods are mainly classified as convenience goods, shopping goods, or specialty goods based on consumer purchase patterns. This classification system can be extended to retailers by considering the reasons consumers shop at particular retail stores. Remember, all the marketing mix variables must work together. If consumers view a product as a convenience good, then the retail store needs to be designed as a convenience retailer. If consumers view a product as a shopping good, the retail store needs to be designed as a shopping retailer, and so on. When the product view and the store design do not match, the consumer becomes confused. Could you imagine finding a Rolex watch in a convenience store design or a can of Coke in a specialty store design.

12 Store Product Combinations Customers View Product Store Convenience Shopping Specialty Convenience Shopping Specialty

13 Four Positioning Strategies For Retailers Breadth of Product Line is the range of products sold through each outlet. Value Added includes factors as location, product or service reliability, and prestige.

14 Wholesaling Wholesaling can be defined as all the activities involved in selling goods and services to those buying for resale or business use. Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers, and other wholesalers. The three types of wholesalers are: Merchant Wholesalers Brokers and Agents Manufacturers/Retailers Branches and Offices

15 Types Of Wholesale Intermediaries Merchant Wholesalers -- Independently owned firms that take title to the goods they handle. There are two types: 1. Full-service wholesalers perform all distribution functions. 2. Limited-function wholesalers perform only selected distribution functions.

16 Types Of Limited Function Wholesalers Rack Jobbers -- Furnish racks or shelves of merchandise such as music and magazines for retailers for display and sell them on consignment. Cash-and-Carry Wholesalers -- Serve mostly smaller retailers with a limited assortment of products. Drop Shippers -- Take orders from retailers and other wholesalers and have the merchandise shipped from producer to buyer.

17 Agents and Brokers Agents generally maintain long-term relationships with the clients they represent. (Manufacturer s or Sales Agents) Brokers usually represent clients on a temporary basis. Agents and Brokers can operate at the retail level. Examples: Real estate agents and stockbrokers.

18 Types Of Wholesale Intermediaries Manufacturer/Retailer Branches and Offices business that is owned and operated by a seller or buyer. 1. Manufacturer/Retailer Branch Office has offices for sales representatives and carries inventory to fill orders. Examples: Car dealers and tire sellers 2. Manufacturer/Retailer Sales Office has offices for sales representatives that sell products that are delivered at a later time. Example: Carpet makers.

19 Functions Performed By Wholesaler Types

20 SELF CHECK Answer the following questions

21 1. What are the two basic types of merchant wholesalers? A. Full-service wholesalers and limitedfunction wholesalers. B. Functional wholesalers and distributive wholesalers. C. Independent wholesalers and subsidiary wholesalers. D. Capital wholesalers and full-value wholesalers. E. Total-service wholesalers and no-service wholesalers.

22 2. Which of the following would not be classified as a limited-function wholesaler? A. Disco Duck stocks shelves in supermarkets with audio CDs of golden oldies from the 70s and 80s, which it sells on consignment. B. Supplies-R-Us sells a limited assortment of products to retailers for cash only. C. Jim helps buyers and sellers of used construction equipment negotiate the terms and conditions of their transactions, but does not actually take title to any of the equipment. D. RightWrite sells all types of fine stationery and pens to the general public. E. None of the above are limited-function wholesaler.

23 3. Which of the following conditions increases the chances of a retailer opting to be categorized as a self-service retailer? A. When consumers need warranty information about shopping goods. B. When customers are willing to conduct their own locate-compare-select process. C. When the store offers luxury products at highly affordable prices. D. When customers are looking for a narrow product line with a deep assortment. E. When the store has been converted into a designer shop from a department store.

24 4. GameStop, a video game retailer, offers a deep assortment of video games and video game consoles. GameStop is best described as a(n). A. department store B. supermarket C. specialty store D. discount store E. off-price retailer

25 5. Comstock Coal Distributors does not mine coal itself. In fact, the firm does not even store or handle coal. Instead, Comstock solicits orders for low sulfur coal from other firms, then purchases the required amount from suppliers and directs them to ship the coal to its customers. Comstock is a A. drop shipper. B. cash-and-carry wholesaler. C. broker. D. rack jobber. E. semi-retailer.

26 6. Barbara Bunny started a retail business, and to gain a competitive foothold, offered the customer lower prices through the reduction or elimination of services. As time progressed, Barbara added more services and had to increase her prices gradually. Barbara Bunny then became vulnerable to newer, lower priced retailers who offered minimum services. This is an EXAMPLE of the concept known as A. the retailing spiral. B. as the wheel turns. C. the retailing curve. D. what goes around, comes around. E. the wheel of retailing.

27 7. Which of the following statements is TRUE of retailing? A. All retail stores are full-service retail stores. B. A department store has a narrow product line with a deep assortment. C. The largest type of retail outlet is a supermarket. D. Services like hotels, banks, airlines, colleges, restaurants, and hospitals can be retailed. E. A feature common to all types of retail stores is the use of the everyday low pricing strategy.

28 8. Which of the following is an impact of the Great Recession on retailing trends? A. Economic shift toward higher prices. B. Lower costs for retailers. C. Tighter consumer spending patterns. D. Longer retail life cycles. E. Prohibition on new retail forms.

29 9. A brings buyers and sellers together and assists in negotiations. A. distributor B. broker C. retailer D. manufacturer E. supplier

30 10. Hamilton Wholesaling, an electronics wholesaling firm, provides many services to customers including buying, storing, and transporting expensive and delicate electronics equipment. Hamilton takes title of ownership to all goods that the firm handles. Hamilton is most likely a(n). A. wholesaling broker B. merchant wholesaler C. agent wholesaler D. manufacturer's agent E. manufacturer s representative

31 ANSWERS 1. A 2. D 3. B 4. C 5. A 6. E 7. D 8. C 9. B 10. B