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16. Managing Retailing, Wholesaling, and Logistics. Marketing Management, 13 th ed. Chapter Questions. What major types of marketing intermediaries occupy this sector? What marketing decisions do these marketing intermediaries make? What are the major trends with marketing intermediaries?.

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Managing retailing wholesaling and logistics


Managing Retailing, Wholesaling, and Logistics

Marketing Management, 13th ed

Chapter questions
Chapter Questions

What major types of marketing intermediaries occupy this sector?

What marketing decisions do these marketing intermediaries make?

What are the major trends with marketing intermediaries?


What is retailing
What is Retailing?

Retailing includes all the activities involved in

selling goods or services directly to final

consumers for personal, non-business use.

Planning a retailer s strategy
Planning a Retailer’s Strategy


Product Selection

Fairness in Dealings

Helpful Information


Social Image

Shopping Atmosphere


Product Selection

Key Features Affecting Consumers’ Retail Choice

Fairness in Dealings

Helpful Information


Social Image

Major retailer types
Major Retailer Types

  • Specialty store—narrow product line

  • Department store —several product lines

  • Supermarket—large, low-cost, low-margin, high-volume, self-service store designed to meet total needs for food and household products

  • Convenience store—small store in residential area, often open 24/7, limited line of high-turnover convenience products plus take out

  • Discount store—standard or specialty merchandise; low-margin, high-volume stores

  • Off-price retailer—leftover goods, overruns, irregular merchandise sold at less than retail

  • Superstore—huge selling space, routinely purchase food and household items, plus services (laundry, shoe repair, dry cleaning, check cashing; category killer)

  • Catalog showroom— broad selection of high-markup, fast-moving, brand-name goods sold by catalog at discount


Conventional Retailers – Avoid Price Competition



& service


shops &

dept. stores



&/or reduced

margins &



disc. houses,

mass merch.,

super-, club-

Stores, +

Safeway, IKEA, Home Depot, Costco



Single- &


line stores

Added conv.,

higher margins,




vending, door-

to-door, phone,

mail, some


7-11, Pepsi vending, Avon, Lands’ End, QVC




margins, more



eBay, Amazon, Zappos, Netflix, Dell

Ritz Camera, Coach, Gap, Macy’s

Retailer Size and Profits

  • Large retail stores do most of the business

    • Only about 11% of stores sell over $5 million annually but they account for almost 70% of retail sales

    • Yet, some small retailers control "their" market

  • Larger stores enjoy economies of scale

  • Corporate chain stores also enjoy economies of scale

    • Account for about half of all retail sales (and much higher in some product categories)

    • Continuing to grow

  • Independent retailers form chains

    • Cooperative chains are retailer sponsored

    • Voluntary chains are wholesaler sponsored

Retailing and the Internet

  • Growing fast, but still in very early stages

  • Convenience not defined by location of product assortment

  • More information of some types but not others

    • More technical detail

    • Less touch and feel

  • Generally requires more advance planning

    • Delivery takes time and adds costs

  • Competitive effects impact other retailers

  • New types of specialists and intermediaries will continue to develop

Mass-Merchandising Concept

  • Retailers should offer low prices to get faster turnover and greater sales volume—by appealing to larger markets

  • Started with supermarkets in 1930s

  • Really caught on with mass-merchandisers

    • large stores

    • self-service oriented

    • Examples: Wal-Mart, Target

  • Competition among mass-merchandisers has heated up

  • Limited-line mass-merchandisers (“category killers”) grew rapidly, but growth has subsided

Examples of Scrambled Merchandising

  • Videotapes and DVDs at grocery stores

  • Microwave popcorn at video rental stores

  • Computer software at bookstores

  • Clothing and fashion accessories at a motorcycle dealership

  • One-hour prints from digital pictures at drugstores

Levels of retail service
Levels of Retail Service

Self service—many customers will to locate-compare-select process to save money

Self selection—customers find their own goods, although they can ask for assistance

Limited service—retailers carry more shopping goods and services such as credit and merchandise-return privileges

Full service—salespeople are ready to assist in every phase of the locate-compare-select process


Nonstore retailing
Nonstore Retailing

Direct selling —multilevel selling and network marketing selling door-to-door, or at home sales parties

Direct marketing —direct mail, catalog marketing, telemarketing, television direct-response marketing, electronic shopping

Automatic vending —variety of merchandise, impulse goods, hosiery, cosmetics, hot food, etc.

Buying service —storeless retailer servicing a specific clientele—usually employees of a large organization—who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership


Major types of corporate retail organizations
Major Types of Corporate Retail Organizations

Corporate chain store —two or more outlets owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise (GAP)

Voluntary chain —wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising (Independent Grocers Alliance)

Retailer cooperative —independent retailers using a central buying organization and joint promotion efforts (ACE Hardware)

Consumer cooperative —retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends

Franchise organization —contractual association between a franchisor and franchisees (McDonald’s)

Merchandising conglomerate —corporation that combines several diversified retailing lines and forms under central ownership, with some integration of distribution and management (Allied Domeq PLC with Dunkin’ Donuts and Baskin-Robbins, plus a number of British retailers and a wine and spirits group


Department store model the showcase store
Department Store Model: The Showcase Store

What is a franchising system
What is a Franchising System?

A franchising system is a system of individual franchisees, a tightly knit group of enterprises whose systematic operations are planned, directed, and controlled by the operation’s franchisor.


Franchise Operations

  • The franchiser develops a good marketing strategy and the retail franchise holders carry out the strategy in their own units.

  • Strong legal contracts govern the relationship.

  • Franchisers have been successful with newcomers.

    • especially popular with service operations

  • Franchise sales account for about half of all retail sales.

Characteristics of franchises
Characteristics of Franchises

The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments

The franchisee pays for the right to be part of the system

The franchisor provides its franchisees with a system for doing business


Changes in the retail environment
Changes in the Retail Environment

New retail forms and combinations

Growth of intertype competition

Competition between store-based and non-store-based retailing

Growth of giant retailers

Decline of middle market retailers

Growing investment in technology

Global profile of major retailers


New retail forms and combinations
New Retail Forms and Combinations

  • Combination retailers—some supermarkets includes bank branches; bookstore feature coffee shops, etc.

  • Pop-ups —lt retailers promote brands, reach seasonal shoppers for a few weeks in busy areas and create buzz (JC Penney unveiled designer Chris Madden’s home, bath, and kitchen line in a 2,500-square-foot Rockefeller Center space for one month only.

  • Showcase stores—Some stores not only sell other companies’ brands but get the vendors of the brands to take responsibility for stock, staff, and even the selling space. The vendors then hand over a percentage of the sales to the store’s owner


Retailers marketing decisions
Retailers’ Marketing Decisions

Target market—profile of customer

Product assortment—breadth and depth

Procurement—merchandise sources

Prices—decided in relation to the target market

Services—pre-purchase, post-purchase, ancillary


Retailers marketing decisions cont
Retailers’ Marketing Decisions (cont.)

Store atmosphere

Store activities—brick-and-mortar and e-commerce

Communications—advertisement, special sale, money-saving coupons, etc.



Store atmosphere
Store Atmosphere

  • Walls

  • Lighting

  • Signage

  • Product placement

  • Floors

  • Surface space

  • Music


Retail category management
Retail Category Management

Define the category

Figure out its role

Assess performance

Set goals

Choose the audience

Figure out tactics

Implement the plan

Retailer services mix
Retailer Services Mix

Pre-purchase services —accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows, and trade-ins

Post-purchase services —shipping and delivery, gift wrapping, adjustments and returns, alterations and tailoring, installations

Ancillary services —general information, check cashing, parking, restaurants, repairs, interior decorating, credit, rest rooms, and baby-attendant service


Location decision
Location Decision

  • General business districts—downtown

  • Regional shopping centers—large suburban malls containing 40 to 200 stores, typically featuring one or two nationally known anchor store, such as JC Penney or Lord & Taylor

  • Community shopping centers—smaller malls with one anchor store and between 20 and 40 smaller stores

  • Strip malls strips—cluster of stores, usually housed in one long building, serving a neighborhood’s needs for groceries, hardware, laundry, shoe repair, and dry cleaning

    • Location within a larger store—certain well-known retailers—McDonald’s, Starbucks, Nathan’s, Dunkin’ Donuts—locate new, smaller units as concession space within larger stores or operations, such as airports, schools, or department stores

Tips for increasing sales in retail space
Tips for Increasing Sales in Retail Space

Keep shoppers in the store

Don’t make them hunt

Make merchandise available to the reach and touch

Note that men do not ask questions

Remember women need space

Make checkout easy


Indicators of sales effectiveness
Indicators of Sales Effectiveness

Number of people passing by

% who enter store

% of those who buy

Average amount

spent per sale

Trends in retailing
Trends in Retailing

New retail forms and combinations

Competition between store-based and non-store-based retailing

Growth of giant retailers

Decline of middle market retailers

Growing investment in technology

Global presence of major retailers

Some Trends in Retailing

  • Growth of Internet merchants and online retailing

  • Electronic retailing (kiosks, TV, etc.)

  • In-home shopping (catalogs, etc.)

  • More price competition

  • Vertical integration

  • More chains and franchises

    • chains becoming larger, more powerful

  • More and better information (for example, scanner data)

Private label brands
Private Label Brands

Private labels (reseller, store, house, or distributor brand) is a brand that retailers and wholesalers develop are ubiquitous

Consumer accepts private labels

Private-label buyers come from all socioeconomic strata

Private labels are not a recessionary phenomenon

Consumer loyalty shifts from manufacturers to retailers


Wholesaling functions
Wholesaling Functions

  • Selling and promoting—sales force help manufacturers reach many small business customers at a relatively low cost

  • Buying and assortment building—select items and build the assortment their customers need

  • Bulk breaking—buy large carload lots and breaking the bulk into smaller units

  • Warehousing—hold inventories, and reduce inventory costs and risks to suppliers and customers

  • Transportation—provide quicker delivery to buyers because they are closer to the buyers

  • Financing—grant credit, and finance suppliers by ordering early and paying bills on time

  • Risk bearing—absorb some risk by taking title and bearing cost of theft, damage, spoilage, and obsolescence

  • Market information—supply competitor activities, new products, price developments, etc

  • Management services and counseling—training sales clerks, helping with store layouts and displays, etc.


Wholesalers marketing decisions
Wholesalers’ Marketing Decisions

Target market

Product assortment




What a Wholesaler Might Do for Customers

  • Regroup products—to provide quantity and assortment customers need

  • Anticipate customers' needs—and buy accordingly

  • Carry products in inventory—which helps reduce customers' inventory costs

  • Deliver products promptly and economically

  • Grant credit

  • Provide information and advice

  • Provide part of the buying function—make it easy for customers to buy what they want

What a Wholesaler Might Do for Producer-Suppliers

  • Provide part of the selling function

  • Store inventory (cut producer's warehousing costs)

  • Supply capital (by purchasing producer's output before it is sold to final customers)

  • Reduce credit risks

  • Provide marketing information

Manufacturer’s Sales Branches

  • Separate business that producers set up away from their factories to handle wholesaling functions.

  • Represent only about 4.3 percent of all wholesalers

  • Handle 28.4 percent of total wholesale sales

    • Sales high because they are placed in best markets

  • True operating costs may be difficult to determine

Major wholesaler types
Major Wholesaler Types




Brokers and agents



Merchant Wholesalers

  • Take title to (own) the products they sell

  • About 88.3% of wholesalers are merchant wholesalers

  • Handle about 61.2% of total wholesale sales

  • Two basic types:

    • Full-service wholesalers

    • Limited-function wholesalers

Full-Service Merchant Wholesalers

  • Provide all of the wholesaling functions

  • Three major types:

    • General merchandise wholesalers

    • Single-line (or general-line) wholesalers

    • Specialty wholesalers

Some Limited-Function Merchant Wholesalers

  • Cash and carry wholesalers—operates like service customers except must pay cash

  • Drop-shippers—take title to products they sell but do not stock or deliver them

  • Truck wholesalers—typically deliver perishable items

  • Rack jobbers—usually display products on their own racks

  • Catalog wholesalers—sell out of catalogs

Agent middlemen are strong on selling
Agent Middlemen Are Strong on Selling

Manufacturer’s Agents


Auction Companies

Selling Agents

Manufacturer’s Agents


Types of Agent Middlemen

Selling Agents

Manufacturers’ Agents

  • Sell similar products for several noncompeting producers

  • Work on a commission basis

  • Basically are independent, aggressive sales reps

  • Especially helpful to small producers and producers whose customers are very spread out


  • Main purpose is to bring buyers and sellers together

  • Usually have a temporary relationship with buyer and seller while the deal is negotiated

  • Earn a commission—from either the buyer or seller—depending on who hired them

  • Especially common with seasonal products and products sold infrequently

Agent Middlemen

  • Wholesalers who do not own the products they sell

  • Main purpose is to help with buying and selling

  • Usually operate at relatively low cost

  • Usually provide fewer functions than merchant wholesalers

  • Often specialize not only by product-type, but also by customer type

Trends in Wholesaling

  • Fewer, but larger, wholesalers

  • Use of computers to control inventory, order processing

  • Closer relationships with customers

  • More selective in picking customers

Market logistics planning
Market Logistics Planning

Deciding on the company’s value proposition to its customers

Deciding on the best channel design and network strategy

Developing operational excellence

Implementing the solution


What are integrated logistics systems
What are Integrated Logistics Systems?

An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information technology.


Market logistics
Market Logistics

  • Sales forecasting

  • Distribution scheduling

  • Production plans

  • Finished-goods inventory decisions

  • Packaging

  • In-plant warehousing

  • Shipping-room processing

  • Outbound transportation

  • Field warehousing

  • Customer delivery and servicing


Market logistics decisions
Market Logistics Decisions

  • How should orders be handled?

  • Where should stock be located?

  • How much stock should be held?

  • How should goods be shipped?

Transportation factors
Transportation Factors

  • Speed

  • Frequency

  • Dependability

  • Capability

  • Availability

  • Traceability

  • Cost