© 2002 Pearson Education Canada Inc.

12-1

principles of MARKETING

Chapter 12Chapter 12

Retailing and Wholesaling

© 2002 Pearson Education Canada Inc.

12-2

Chapter Objectives

• Explain roles in the distribution channel

• Describe major types of retailers

• Identify major types of wholesalers

• Explain marketing decisions facing retailers and wholesalers

© 2002 Pearson Education Canada Inc.

12-3

Retailing

• All activities involved in selling goods or services directly to final consumers for their personal, non-business use– Most via retail stores

– Non-store growing fast

© 2002 Pearson Education Canada Inc.

12-4

Store Retailing Classifications

Amount of ServiceAmount of Service

Product LineProduct Line

Relative PricesRelative Prices

Control of OutletsRetail Organizations

© 2002 Pearson Education Canada Inc.

12-5

Store Retailing Classifications:Amount of Service

• Self-service retailers– Basis of all discount

operations

• Limited-service retailers– Assist with information

– Shopping goods

• Full-service retailers– Customers waited on

– More specialty goods

© 2002 Pearson Education Canada Inc.

12-6

Store Retailing Classifications:Product Line

• Specialty stores

• Department stores

• Supermarkets– Scrambled merchandising

• Convenience stores

• Superstores– Category killers

– Hypermarkets

• Service retailers

© 2002 Pearson Education Canada Inc.

12-7

Store Retailing Classifications:Relative Prices

• Discount stores• Off-price retailers

– Factory outlets

– Independents

– Warehouse clubs• Wholesale clubs

• Membership warehouses

© 2002 Pearson Education Canada Inc.

12-8

Store Retailing Classifications: Retail Organizations

Type Description Examples

CorporateChainStoresVoluntaryChains

RetailerCo-ops

Commonly owned and controlledCentral buying and merchandisingSimilar lines of merchandiseWholesaler sponsoredIndependently owned, commonbuying and merchandisingIndependent retailersCentral buyingJoint promotion efforts

La Senza Sports Experts Loblaws IGA Western Auto True Value Calgary Group Ace MEC

© 2002 Pearson Education Canada Inc.

12-9

Store Retailing Classifications: Retail Organizations

Type Description Examples

FranchiseOrganizations

Merchandisingconglomerates

Contract between afranchiser and franchiseeRight to own or operateone or more unitsCombines severaldiversified retailing linesCentral ownershipSome integrated distributionand management

McDonald’sSubway, Pizza HutJiffy Lube, 7-ElevenYogen FrüzVenator Group (ownsFoot Locker, NorthernReflections, LadyFoot Locker, NorthernTraditions)

© 2002 Pearson Education Canada Inc.

12-10

Retailer Marketing Decisions

Retailerstrategy

Target market

Retail storepositioning

RetailerMarketing mix

Product and serviceassortment

PricesPromotion

Place (location)

© 2002 Pearson Education Canada Inc.

12-11

Retailer Marketing Decisions: Target Market and Positioning

• Define target markets• Select positioning• Upscale - midscale -

or downscale?• Variety?• Depth of assortment?• Convenience?• Low prices?

© 2002 Pearson Education Canada Inc.

12-12

Retailer Marketing Decisions: Product Assortment and Services• Product assortment

– Width and Depth

– Quality of goods

– Must differentiate• Unique product

• Blockbuster merchandising events

• Highly targeted

© 2002 Pearson Education Canada Inc.

12-13

Retailer Marketing Decisions: Product Assortment and Services

• Services mix– Key to non-price

competition

• Store atmosphere– Physical layout

– Suits target market

– Moves customer to buy

– “Theatres”

© 2002 Pearson Education Canada Inc.

12-14

Retailer Marketing Decisions: Price Decision

• High markups on lower volume?

• Lower markups on higher volume?

• Decide in relation to target market, product and service assortment, and competition

© 2002 Pearson Education Canada Inc.

12-15

Retailer Marketing Decisions: Promotion Decision

• Advertising– Newspaper, magazine

radio, TV, ‘Net, circulars, direct-mail

– Cooperative advertising

• Personal selling– Training salespeople to

greet, meet, and handle

© 2002 Pearson Education Canada Inc.

12-16

Retailer Marketing Decisions: Promotion Decision

• Sales promotion– In-store demos,

displays, contests, celebrities

• Public relations– Press conferences,

speeches, store openings, special events, newsletters, magazines, public service activities

© 2002 Pearson Education Canada Inc.

12-17

Retailer Marketing Decisions: Place Decision

• Location, location, location! = ability to attract customers

• Facilities a major cost• Central business district• Shopping centre

– Regional

– Community

– Neighbourhood

• Power centre

© 2002 Pearson Education Canada Inc.

12-18

The Future of Retailing• New retail forms and shortening

retail life cycles– Wheel of retailing

• Growth of non-store retailing– Canadian retailers slow to e-tail

• Not a threat

• Lack of senior commitment

• Order fulfillment challenge

• Lack of resources

• Measuring performance

© 2002 Pearson Education Canada Inc.

12-19

The Future of Retailing

• Increasing intertype competition

• Rise of mega-retailers• Growing importance

of retail technology• Retail stores as

“communities” or “hangouts”

© 2002 Pearson Education Canada Inc.

12-20

Wholesaling

• All activities involved in selling goods and services to those buying for resale or business use

• Better at performing one of the channel functions

© 2002 Pearson Education Canada Inc.

12-21

Types of Wholesalers

• Merchant Wholesalers– 50 % of total volume

• Brokers and Agents – 11% of total volume

• Manufacturers’ Sales Branches and Offices– 31% of total volume

© 2002 Pearson Education Canada Inc.

12-22

Types of Wholesalers• Merchant Wholesalers

– Take title to merchandise they handle– Full-Service or Limited-Service

• Brokers and Agents– Broker: Brings buyers and sellers together, assists in

negotiation– Agent: Represents buyers or sellers on a more permanent

basis• Manufacturers Sales Branches and Offices

– By sellers or buyers themselves rather than through independent wholesalers

© 2002 Pearson Education Canada Inc.

12-23

Types of Wholesalers:Merchant Wholesalers

Full-service wholesalers– Wholesale merchants

– Industrial distributors

Limited-service wholesalers– Cash-and-carry

– Truck (jobbers)

– Drop shippers

– Rack jobbers

– Producers’ cooperatives

– Mail-order

© 2002 Pearson Education Canada Inc.

12-24

Types of Wholesalers:Brokers and Agents

• Brokers• Agents

– Manufacturers’ agents

– Selling agents

– Purchasing agents

– Commission merchants

© 2002 Pearson Education Canada Inc.

12-25

Types of Wholesalers:Manufacturers’ and Retailers’

Branches and Offices

• Sales branches and offices

• Purchasing offices

© 2002 Pearson Education Canada Inc.

12-26

Wholesaler Marketing Decisions

Wholesalerstrategy

Target market

Retail storepositioning

WholesalerMarketing mix

Product and serviceassortment

PricesPromotion

Place (location)

© 2002 Pearson Education Canada Inc.

12-27

Wholesaler Marketing Decisions:Target Market and Positioning

• Can choose target market by:– Size of customer

– Type of customer

– Need for service

– Other factors

• Build relationships– Automatic reordering

– Management training

– Sponsorship

© 2002 Pearson Education Canada Inc.

12-28

Wholesaler Marketing Decisions:Marketing Mix

• Product– Profitability

– Define services

– Find mix valuable to target customers

• Price– Low profit margins

– Standard mark-ups

• Promotion– Not well done

– Personal selling behind the times

– Make greater use of supplier materials

• Place– Location and facilities

– Automation

© 2002 Pearson Education Canada Inc.

12-29

Trends in Wholesaling

• Fierce resistance to price increases– Improve services and

reduce costs

• Competition• Consolidation• More services• Blurred distinction

between large and small

© 2002 Pearson Education Canada Inc.

12-30

Chapter Review

• What are the roles of retailers and wholesalers in the distribution channel?

• What are the major types of retailers?

• What are the major types of wholesalers?

• Discuss the marketing decisions that retailers and wholesalers face