Chapter 16: Retailing And Wholesaling

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(retail outlet) Corporate Chain

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Multiple Outlets under common owner ship (Macys). Centralization in decision making and purchasing is common. Chain stores have advantages in dealing with manufactures. Large chain can bargain with a manufacturer for deals, etc.

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(retail outlet) Contractual System

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Independently owned stores that band together like a chain- franchise. Two types of franchisesL business formal franshice like mcdonalds and product-distribution franchise like a ford dealership or coca cola distributors.

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(retail outlet) Business- Format Franchise

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Provide step by step procedures for doing business. It's attractive because it offers an opportunity for people to enter a well-known, established business with advice provided. Franchise fee may be less than the cost of setting up an independent business. By selling franchises, a business can reduce cost of expansion but loses some control.

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Retailing

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includes all activities involved in selling, renting, and providing products and services to ultimate consumers fro personal, family or household use. to consumers, the value of retailing is in the form of utilities provided.

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(Form of Ownership) Independent Retailer

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Independent business owned by an individual. It can offer customers convenience, personal service and lifestyle compatibility

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Level of Service: Self Service

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Self-service requires that customers perform many functions during the purchase process. Ex. red box or gas stations

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Level of Service: Limited Service

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limited-service outlets provide some services, but not others. Ec. might do returns but not clothing alterations.

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Level of Service: Full Service

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full service retailers provide many services to theyr customers. Ex: Sake fifth avenue. offers on site alterations and tailoring, free exchanges, personal stylist, etc. They depend on better service to sell their distinctive, higher-margin good and retain their customers.

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Type of Merchandise Line: Depth of product Line

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means the store carries a large assortment of each item, such as a shoe store that offers running shoes, dress, shoes, children shoes

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Type of Merchandise Line: Breadth of Product line

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refers to the variety of different items a store carries such as appliances, clothes, and shoes.

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Depth of Line: Specialty Outlets, Category Killers

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Specialty Outlets: like victoria sercret, sells great depth in one line, women's lingerie

Category Killers: outlets that focus on one type of product at very competitive prices, often referred to as category killers because they dominate the market.

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Breafth of line: scrambled merchandising, hypermarket, inter type competition

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Scrambled merchandising: offering unrelated products in a single store. Cvs has candy, camera equipment

Hypermarket: a form of scrambled merchandising. a large store that carries a TON of things- these stores provide variety, quality and low prices for groceries and general merchandise items.

Intertype Competition: caused by scrambled marketing: competition between normally non competing stores. Ex. a local bakery may compete with a gas station or department store

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NonStore Retailing

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Automatic Vending
Direct Mail Catalogue
Television Home Shopping
Online Retailing
Telemarketing
Direct Selling

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Retail Positioning matrix

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A matrix developed by the MAC Group, inc. they look at the breadth of product line and the value added. Value added: location, product reliability, or prestige

1. High value, broad product line: pay attention to store design and product lines. Merchanside often has a high margin of profit, high levels of service (bloomingdales)
2. Low Value and broad line (Walmart) they typically trade a lower price for increased volume in sales. Retailers focus on price with low service levels

3. Tiffany and co: high value, narrow line. Typically sell restricted range of items with high status and quality. high customer service

4. Low value, narrow line (pay less shoe stores) these outlets appeal to value-conscious consumers. centralized advertising, merchandising, buying and distribution. stores usually in same deign and layout.

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Retail Pricing: Markup

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how much should be added to the cost the retailer paid for a product to reach final selling price.

Original markup: retailers decide this at the beginning. it is the difference between the retailer cost and the selling price

Maintained markup: this is the final decision of markup when the product is sold. it is the difference between the final selling price and retailer cost- aka Gross margin (often happens when the products don't sell as quickly as anticipated.)

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Retail Pricing: Markdown:

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discounting a product because the product does not sell at the original price and discounts are necessary

Often new models force the price of old models down. also discounts can increase demand for complementary items

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Markdown: timing

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Timing: sometimes done as soon as prices fall, others delay markdowns to discourage bargain hunters and maintain image of quality

Some use price discounts as part of regular merchandising policy: everyday low pricing: walmart as an example. Emphasizes consistently low prices and elminitate most markdowns. Sometimes this can decrease perceived quality of items, through

Other strategy: everyday fair pricing. these retailers might not ofer the lowest price but try to create value through serve and total buying experience.

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BenchMark/ signpost

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popular items that consumers use as a way to form an overall impression of stores prices. Ex: can of coke.
Price is often an important factor of consumers perception of value. It store prices based on rebates, need to make sure that rebates are timely.

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Shrinkage

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Special issue for retailers. Shrinkage is breakage, theft or fraud by customers or employees. Ex: fraudulent returns

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Offprice retailing

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Is a retail pricing practice used by retailers like tj maxx. It involves selling brand-name merchandise at lower than regular prices. Difference between off-price retailer and discount store is that off-price merchandise is bought by retailer from manufacrutres with excess inventory while discounter buys at full wholesale prices but takes less of a markup. Therefore, off-pricing is often unpredictable

Examples of off pricing retailing: Warehouse club (large stores are stark outlets with little displays, customer service, or home deliveries. Require an annual fee to shop there), outlet stores (allows retailers to sell excess product while maintaining image), single-price or extreme value retailers like Familt dollar or dollar general: these stores attract customers who want value and a small store experience

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Store location

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Central Business DistrictL the oldest retail setting, community's downtown, major shopping area.less convenient because of lack of parking, high crime rates, exposure to weather

regional shopping centers: usually 50-150 stores within a 5-10 mile range. usually conns a few del known anchor stores

community shopping center: one primary store (usually department store) and 20-40 smaller outlets. Often serve consumers who are close by

Strip mall: neighborhood cluster of stores, serves those within a 10 minute drive

power center: a variation of the strip mall which is a huge strip with multiple anchor stores often contains a supermarket which brings consumers there weekly

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Retail Communication: Shopper marketing

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the use of displays, coupons, product samples, and other brand communications to influence shopping behavior in a store. can influence online shopping encironemnet. Use image and ambience to attract target market and fortify beliefs.

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retail mix: merchandise

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the way to manage depth and breadth of product line requires knowledge of target market and competing brands. A popular approach to managing merchandise: CATEGORY MANAGEMENT. assigns the manager the responsibility for selecting all products that consumers in a market segment might view as substitutes, with the objective of maximizing sales and profits in each category.

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Wheel of Retailing

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describes how new forms of retail enter the market. they usually enter as low=status, low-margin stores that gradually add more fixtures and embellishments to increase attractiveness to consumers. As time passes they add more services, prices and status increase. They then are competing against the low price and low margin of new retailers- they wheel repeats itself.

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The Retail Life Cycle

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The process of growth and decline that retail outlets like products, experience.
Early Growth: the emergency of a retail outlet, sharp departure from competition. Market shares rise gradually, although profits may be low because of start-up costs

Accelerated development: market share and profit achieve greatest growth rates. usually multiple outlets established here to increase distribution. competition often arises here. they fight to maintain dominant market share

Maturity Stage: some competitors have already dropped from the markets. new retail forms enter the market, stores try to maintain market share and price discounting occurs

Decline Stage: the market share and profit fall rapidly. to precent further decline, they must find ways of discouraging consumers from moving to low margin, mass volume outlets or high price, high service boutiques

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Future Changes: MultiChannel Retailing

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retailers in the future are likely to combine many of the formats to offer a broader spectrum of benefits and experiences and to appeal to different segments of consumers.

These multichannel retailers will combine traditions and non traditional store formats like barnes and noble creating a website that now competes with amazon.com

instead of cannibalizing they are integrated and interact, create value

Experts suggest a new term: omnichannel retailing: this integrating of various retail channels

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Future changes: managing customer experience

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appealing to men: stand alone men's sections that combine electronics, clothes, accessories in one place

gocery stores: gender neutral

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Merchant Wholesalers (intermediaries): full line

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independently owned firms that take title to the merchandise they handle. Go by different names like industrial distributor.

Full-service: General merchandise wholesalers carry a broad assortment and perform all channel functions. do not maintain much depth

drug stores

Specialty merchandise wholesalers: offer a narrow wrangle of products with assortment

they personal all channel functions. found in health food, seafood, automotice parts

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Merchant Wholesalers (intermediaries): limited service

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4 types:

1. rack jobbers: furnish the racks or shelves in retail stores, perform all channel functions, and sell on consignment which means they retain the title ro products and bill retailers only for the merchandise sold. a vendor who rents shelf space

2. cash and carry wholesalers: take title to merchandise butsell only to buyers who call on them, pay cash, furnish own transportation. they carry limited product assortment and do not make deliveries. used for elective supplies, groceries

3. drop shippers/ desk jobbers: wholesalers that own the merchandise they sell but do not physically handle stock or deliver it. they solidity orders from retailers and other wholesalers and have the merchandise shipped directly from a producser to a buyer

Truck jobbersL small wholesalers that have a small warehouse which stocks trucks fro distribution to retailers. they usually handily limited assortments on fast-moving, perishable items sold for cash from trucks in original packages.

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Agents and Brokers

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Unlike merchants and wholesalers- agents and brokers do not take title to merchandise (take title= become legal owner of goods). typically perform fewer channel functions. they make profit from commissions or fees paid for their services, whereas merchant wholesalers make their profit from the sale of the merchandise they own

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Manufacture's Agnets

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they work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory. act as a producer's salers arm and are responsible for transactional channel functions, primarily selling. Used extensively in auto supply, footwear, steel

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Selling agents

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Represent a single producers and are responsible for the entire marketing function of that producer. they design promo plans, set prices, determine distribution policies, make recommendations.

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Brokers

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independent firms or individuals whose principal function is to bring buyers and sellers together to make sales. Unlike agents they don't usually have a continuous relationship with the buyer or seller. they negate a contract between two parties and move on. frequently used for seasonal products or real estate.

food brokers they act on behalf of producers on a permanent basis and receive commission

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Manufacturer's branch office

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carries a producer's inventory and performs the functions of a full-service wholesaler.

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Manufacturer's sales office

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does not carry inventory. typically performs only a sales function and serves as an alternative to agents and brokers.