Retailing and Wholesaling 11

What is Retailing?

• Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non business use.

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Classification of Retailing

Self-Service, Limited-Service and Full-Service Retailer Product Line Length and Breadth of the Product Assortment Relative Prices Pricing Structure that is Used by the Retailer Independent, Corporate, or Contractual Ownership Organization 11-3

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.” 11-4

Product Line Classification

Specialty Stores: Department Stores:

Carry a wide variety of product lines—typically clothing, home furnishings, and household goods.

Each line is operated as a separate department managed by specialist buyers or merchandisers.

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Product Line Classification

Supermarket:

Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products.

Small stores located near residential areas that are open long hours 7 days a week and carry a limited line of high-turnover convenience goods.

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Product Line Classification

Superstores:

Much larger than regular supermarkets and offer a large assortment of routinely purchased food products, nonfood items, and services.

Category Killers:

Giant specialty stores that carry a very deep assortment of a particular line and is staffed by knowledgeable employees.

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Relative Prices Classification

A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

Off-Price Retailer:

Retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.

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Relative Prices Classification

Off-price retailing operation that is owned and operated by a manufacturer and that normally carries the manufacturer’s surplus, discontinued, or irregular goods.

Independent Off-Price Retailer:

Off-price retailer that is either owned and run by entrepreneurs or is a division of a larger retail operation.

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Relative Prices Classification

Warehouse Club:

Off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

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Organizational Classification

Chain Stores:

Two or more outlets that are owned and controlled, have central buying and merchandising, and sell similar lines of merchandise.

Voluntary Chain:

A wholesaler-sponsored group of independent retailers that engages in bulk buying and common merchandising.

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Organizational Classification

Retailer Cooperative:

A group of independent retailers that bands together to set up a jointly owned, central wholesale operation and conducts joint merchandising and promotion efforts.

A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

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Organizational Classification

Merchandising Conglomerates:

A free-form corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of their distribution and management functions.

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Retailer Marketing Decisions

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Assortment and Services Decisions Product Assortment:

Brand of merchandise Merchandising events

Services Mix:

Different numbers and types of services are key to non-price store differentiation

Store Atmosphere:

Physical layout and “feel” of the store 11-15

Price, Promotion, & Place 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 Retailers can locate in CBDs, various types of shopping centers, strip malls, or power centers 11-16

The Future of Retailing

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New Retail Forms and Shortening Retail Life Cycles Growth of Nonstore Retailing Retail Convergence Rise of the Megaretailers 5.

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Growing Importance of Retail Technology Global Expansion of Major Retailers Retail Stores as “Communities” or “Hangouts” 11-17

The Future of Retailing

New Retail Forms and Shortening Retail Lifecycle Increasing Intertype Competition Growing Importance of Retail Technology Global Expansion of Major Retailers 11-18

The Wheel of Retailing

High Margin High Price High Status 1 2 3 2 1 4 3 Low Margin Low Price Low Status 2 1 = Discount 2 = Superstore 3 = Warehouse Club 4 = Combination Store 3 1

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Wholesaling

• Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use.

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Functions Provided by Wholesalers

Management Services & Advice Market Information Selling & Promoting Buying & Assortment Building Wholesaler Functions Bulk-Breaking Risk Bearing Financing Warehousing Transportation 11-21

Types of Wholesalers

Merchant Wholesaler Independently Owned Business that Takes Title to the Merchandise it Handles.

Account for 50% of wholesaling Manufacturers’ Sales Branches and Offices Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

They Don’t Take Title to the Goods, and They Perform Only a Few Functions.

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Types of Wholesalers

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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 11-23

Wholesaler Marketing Decisions

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Trends in Wholesaling

Distinction Between Large Retailers & Wholesalers is Blurry Will Continue to Increase the Services Provided to Retailers Wholesalers Are Now Going Global 11-25