Chapter 14: Retailing, Direct Marketing, and Wholesaling

1. Chapter 14:Retailing, Direct Marketing, and Wholesaling Pride/Ferrell Foundations of Marketing Fourth Edition Prepared by Milton Pressley University of New Orleans

2. Objectives • Understand the purpose and function of retailers in the marketing channel. • Identify the major types of retailers. • Explore strategic issues in retailing. • Recognize the various forms of direct marketing and selling. • Examine franchising and its benefits and weaknesses. • Understand the nature and functions of wholesalers. • Understand how wholesalers are classified.

3. Retailing • All transactions in which the buyer intends to consume the product through personal, family or household use - Retailer: An organization that purchases products for the purpose of reselling them to ultimate consumers

4. Types of Retailers: General Merchandise Retailers General merchandise retailer – offers a variety of product lines that are stocked in considerable depth

5. Department Store • Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing and internal management Department Store Because of its size, wide product mix, and services provided, Macy’s is classified as a department store.

6. Other Types of Retailers • Discount store – Self-service, general merchandise, brand name products at low prices • Convenience store – Open long hours offering a narrow assortment of convenience items • Supermarket – A complete line of food products with some nonfood items • Superstore – Giant retail outlets carrying food and nonfood products • Hypermarket – Supermarket and discount store combined into one location

7. Discussion Question • Click on the Television below and watch the commercial. Then discuss which type of retail store the ad represents.

8. Warehouse Clubs • Large scale members-only establishments that combine features of cash-and-carry wholesaling with discount • Warehouse showrooms – Large on-premise inventories with minimal services (IKEA) Warehouse Club Sam’s Club is a warehouse club that markets many product lines. Most of Sam’s Club product lines have limited depth.

9. Specialty Retailers

10. Traditional Specialty Stores • Stores that carry a narrow product mix with deep product lines Traditional Specialty Store Traditional specialty stores, like Ann Taylor, have narrow but deep product mixes.

11. Category Killers • A very large specialty store concentrating on a major product category and competing on the basis of low prices and product availability Category Killer Category killers have enormous product mixes and low prices.

12. Off-Price Retailers • Stores that purchase manufacturers’ seconds, overruns, and off-season merchandise at below-wholesale prices • Resale to consumers at deep discounts • Examples: T.J. Maxx, Marshalls, and Burlington Coat Factory

13. The Wheel of Retailing • A hypothesis on the evolution and development of new types of retail stores • New retailers enter a market with low prices, margins, and status. • Low prices are from cost-cutting and attract imitators • Retailers eventually become more elaborate and expensive over time • Many discount stores (like Kohl’s) offer more services and look like department stores

14. High prices and markups, many services, expensive surroundings Department stores General stores, misc. small retailers Department stores Discount stores Factory outlet malls Warehouse clubs Department stores Discount stores Low prices and markups, few services, austere surroundings Category killers Early 20th c. Late 20th c. Early 21st c. The Wheel of Retailing Online retailers

15. Strategic Issues: Location, Location, Location • Various factors when evaluating potential locations - Location of the firm’s target market within the trading area - Kinds of products being sold - Availability of public transportation - Customer characteristics - Competitors’ locations • Types of locations - Freestanding structures - Business districts - Planned shopping centers

16. Types of Planned Shopping Centers • Neighborhood shopping centers - Several small convenience and specialty stores • Community shopping centers - One or two department stores and some specialty stores • Regional shopping centers - Largest department store, widest product mixes and the deepest product lines of all shopping centers • Superregional shopping center – Wide, deep mix attracts customers from many miles away • Lifestyle shopping center – Upscale specialty shops and entertainment • Power shopping center – Off-price stores with category killers

17. Discussion Question • Click on the Television below and watch the commercial for Mall and Water Park of America. Then discuss which type of shopping center you think the Mall of America most resembles.

18. Other Strategic Issues • Retail positioning – • Identifying an un-served or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment • Store image – • A functional and psychological picture in consumers’ mind • Atmospherics – • The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying • Category management – • Managing similar, often substitutable products produced by different manufacturers

19. Direct Marketing • The use of telecommunications and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone or the Internet - Catalog marketing – Customers select from catalogs - Direct response marketing – Customers respond to ads with mail or telephone orders - Telemarketing – Products sold by phone - Television home shopping – Customers order products seen on TV by telephone - Online retailing – Customers shop and buy online

20. Online Retailing • Retailing that makes products available to buyers through online connections Online Retailing Travelocity is an online retailer that offers a broad assortment of travel services.

21. Direct Selling • The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace

22. Discussion Question • Visit the Web Site by clicking on the @ symbol below. After exploring the Site, discuss what type of direct marketing Cabela’s is engaged in. @

23. Franchising • An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration

24. Top U.S. Franchisers and Their Startup Costs

25. Wholesaling • Transactions in which products are bought for resale, for making other products or for general business operations - Services Provided by Wholesalers: • Initiating sales contacts • Providing financial assistance • Serving as conduits for information within the marketing channel • Assisting with marketing strategy • Helping retailers to select inventory • Offering specialized knowledge of market conditions • Offering expert negotiation on final purchases

26. Types of Wholesalers • Merchant wholesalers - Independently owned businesses that take title to goods, assume ownership risks and buy and sell products to other wholesalers, business customers or retailers

27. Types of Wholesalers • Full-service wholesalers - Merchant wholesalers that perform the widest range of wholesaling functions - General merchandise wholesalers – Carry many lines with limited depth in each line - General-line wholesalers – Carry many products from a few lines - Specialty-line wholesalers – Carry perhaps a single line with few products - Rack jobbers – Own and maintain display racks in stores

28. Services That Limited Wholesalers Provide • Cash-and-carry wholesalers –Customers pay cash and provide transportation • Truck wholesalers (truck jobbers) – Transport products direct to customers • Drop shippers (desk jobbers) – Take title but not possession • Mail-order wholesaling – Sell products through catalogs

29. Agents and Brokers • Agents - Intermediaries who represent either buyers or sellers on a permanent basis • Brokers - Intermediaries who bring buyers and sellers together temporarily

30. Services That Agents and Brokers Provide

31. Agents and Brokers (cont’d) • Manufacturers’ agents - Independent intermediaries that represent two or more sellers and offer complete product lines • Selling agents - Intermediaries that market a whole product line or a manufacturer’s entire output • Commission merchants - Agents that receive goods on consignment and negotiate sales in large, central markets

32. Manufacturers’ Sales Branches and Offices • Sales branch - Manufacturer owned intermediaries that sell products and provide support services to the manufacturer’s sales force • Sales offices - Manufacturer owned operations that provide services normally associated with agents

33. After Reviewing This Chapter You Should: • Understand the purpose and function of retailers in the marketing channel. • Know the major types of retailers. • Understand strategic issues in retailing. • Be able to recognize the various forms of direct marketing and selling. • Understand franchising and its benefits and weaknesses. • Understand the nature and functions of wholesalers. • Know how wholesalers are classified.

34. Key Concepts • Retailing • Retailer • General-merchandise retailer • Department stores • Discount stores • Convenience store • Supermarkets • Superstores • Hypermarkets • Warehouse clubs • Warehouse showrooms • Traditional specialty retailers • Category killer • Off-price retailers • Neighborhood shopping centers • Community shopping centers • Regional shopping center • Superregional shopping centers • Lifestyle shopping centers • Power shopping centers • Retail positioning • Atmospherics • Category management • Direct marketing • Catalog marketing • Direct response marketing • Telemarketing • Television home shopping • Online retailing • Direct selling • Franchising • Wholesaling • Wholesaler • Merchant wholesalers • Full-service wholesalers • General merchandise wholesalers