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69 Cards in this Set
- Front
- Back
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The Value Chain
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***Accounting is NOT one of these!
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Cost Drivers
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***Customer Satisfaction is NOT one of these!
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Supply Chain
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all the firms that engage in activities necessary to turn raw materials into a good or service and put it in the hands of the consumer or business customer
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Insourcing
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a practice in which a company contracts with a specialist firm to handle all or part of its supply chain operations. Thus, insourcing involves bringing in an external company to run its essential operations
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Outsourcing
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where a firms delegates nonessential tasks to subcontractors.
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Channel Intermediaries
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firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user
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Distribution Channels provide
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-time, place, and ownership utility
-transportation and storage functions. -provide facilitating functions such as credit, returns, repairs, etc -a variety of communication and transaction functions, such as a sales force, advertising, and even a repository of information about customers. |
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Distribution channels offer logistics or physical distribution functions
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by creating efficiency by reducing the number of transactions necessary for goods to flow from different manufacturers to a large number of consumers in two ways:
1.Breaking Bulk 2. Creating Assortments |
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Breaking Bulk
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Dividing larger quantities of goods into smaller lots in order to meet the needs of buyers
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Creating Assortments
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Providing a variety of products in one location to meet the needs of buyers.
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Retailing is BIG business:
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• 1 in 5 US workers are in retailing.
• There are over 1.2 million retail firms, but only 8% of them have annual sales greater than $2.5 million |
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Facilitating Functions
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Functions of channel intermediaries that make the purchase process easier for customers and manufacturers.
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Disintermediation (of the channel of distribution)
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The elimination of some layers of the channel of distribution in order to cut costs and improve the efficiency of the channel.
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***Everyone knows that Walmart is the #1 retailer in the world
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Home Depot is # 2!
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Different types of Merchant Wholesalers
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• Cash-and-carry wholesalers
• Truck jobbers • Drop shippers • Mail-order wholesalers • Rack jobbers ***NOTE: Monthly wholesale trade in the US for just February 2008 was $377 billion! |
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Steps in Distribution Planning
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Develop Distribution objectives
Evaluate internal and external environmental influences Choose a distribution strategy --number of channel levels --conventional, vertical, or horizontal system --intensive, exclusive, or selective distribution Develop distribution tactics --select channel partners --manage the channel --develop logistics strategies ~~~order processing, warehousing, materials handling, transportation, inventory control |
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Vertical Marketing System
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a channel of distribution in which there is formal cooperation among members at the manufacturing, wholesaling, and retailing levels.
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***Retail sales up
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5.4%, $3.9 Trillion in 2006!
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1. Administered VMS
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channel member remain independent but voluntarily work together
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2. Corporate VMS
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single ownership of all levels by a firm (e.g. Sears)
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***US retail and food services sales for March 2008 were
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$381.4 Billion, which is $4.6 Trillion this year!
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3. Contractual VMS
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Cooperation enforced by legal contracts
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Wheel of Retailing
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a hypothesis that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high-price merchants
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5. Franchise Organizations
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(a forms of contractual VMS)
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***50% of consumers say
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they’re less satisfied with companies’ service 2 years after a merger
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Fulfillment value
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includes in-stock availability of multiple brands and transaction-related services like credit, shipping and easy returns; make money on volume and not high service levels.
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Retail Life Cycle
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a theory that focuses on the various stages that retailers pass through from introduction to decline
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Implementation value
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includes the “know-how” to select, configure, install and support a solution
• Offer deep specialization in a technology, vertical market or service offering • Make money on services, but may also offer a limited range of products, primarily as a convenience to their customers |
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Retail Life Cycle: Growth Stage
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Sales and profits rise, but this also attracts more competition
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Logistics
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the process of designing, managing, and improving the movement of products through the supply chain. It includes purchasing, manufacturing, storage, and transport.
• Note that logistics is about implementation! |
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Logistics was originally a military term
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used to describe everything needed to deliver troops and equipment to the right place, at the right time, and in the right condition. In business, logistics involves delivering exactly what the customer wants, at the right time, in the right place, and at the right price!
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3 factors that motivate retailers to reinvent the way they do business:
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Demographics, technology, & globalization
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The delivery of goods to customers
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involved physical distribution
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Physical distribution
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the activities used to move finished goods from manufacturers to final customers, including order processing, warehousing, materials handling, transportation, and inventory control
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***NOTE: Product development is NOT considered to be part of
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either logistics or physical distribution!
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Demographics are changing retailing practices in each of the following ways:
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1. Demanding greater convenience (e.g., longer hours of operation).
2. There is increasing catering to specific age segments. 3. There is a growing recognition of ethnic diversity. |
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Enterprise Resource Planning (ERP) Systems
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a software system that integrates information from across the entire company. Data needs to be entered into the system only once, at one point, and then the data automatically shares within the organization.
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Point-of-Sale (POS) Systems
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Retail computer systems that collect sales
and are hooked directly into the store’s inventory control system. |
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Metrics within the supply chain area:
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***Customer satisfaction is NOT one of these!
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A retail outlet
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is more that a place to buy something. The retailer adds or subtracts value form the offering with its image, inventory, service quality, location, pricing, and assortment of goods.
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Globalization
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The world is becoming a smaller place. Globalization is a two-way street. Innovative retailing concepts developed overseas are influencing US retailing. However, retailing practices must often be modified depending on the country where the retailing practice occurs.
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***The #2 GLOBAL retailer is
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Carrefour!
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***Top retailer format =
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Supermarkets
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Merchandise Mix
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The total set of all products offered by a retailer, including all product lines sold to all consumer groups
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Scrambled Merchandising
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A merchandising strategy that offers consumers a mixture of merchandise items that are not directly related to one another.
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Scrambled Merchandising is used for:
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• Convert stores into one-tops shopping centers
• Generate more traffic • Realize higher profit margins • Increase impulse purchases |
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Full-Service Retailers
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provide supporting services and trained sales assistants
(e.g. Bloomingdales and Victoria’s Secret) |
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Limited-Service Retailers
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In-between (e.g. Wal-Mart, Target, Old Navy, and Kohl’s)
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Merchandise assortment
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the range of products sold
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Merchandise breadth
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the number of different product lines available
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Merchandise depth
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the variety of choices available for each specific product line
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Convenience Stores
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neighborhood retailers that carry a limited number of frequently purchased items and cater to consumers willing to pay a premium for the ease of buying close to home
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***Convenience store industry sales top
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$569 billion
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***#1
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cigarettes (34.4% of in-store sales)
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Supermarkets
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food stores that carry a wide selection of edibles and related products
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Specialty Stores
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retailers that carry only a new product lines but offer good selection within the lines that they sell
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Discount Stores
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General Merchandise Discount Stores are retailers that offer a broad assortment of items at low prices with minimal service
(e.g. Wal-Mart, Kmart, Target) |
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Department Stores
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retailers that sell a broad range of items and offer a good selection within each product line
• Soft Goods = clothing and home furnishing • Hard Goods = appliances |
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Party Plan System
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a sales technique that relies heavily on people getting caught up in the “group spirit” buying things they would not normally buy (e.g. Tupperware)
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Multilevel Network
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a system is which a master distributor recruits other people to become distributors, sells the company’s products to the recruits, and receives a commission on all merchandise sold by the people recruited
(e.g. Amway) |
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Pyramid Schemes
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an illegal sales technique in which the initial distributors profit by selling merchandise to other distributors, with the result that consumers buy very little products
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***NOTE: 3rd Quarter US e-retailing sales were
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$34.7 billion in 2007
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Benefits of E-Commerce--for the marketer
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• The world is your marketplace
• Decreases costs of doing business • Very specialized businesses can be successful • Real-time pricing |
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Limitations of E-Commerce—for the consumer
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• Lack of security
• Fraud • Can’t touch items • Exact colors may not reproduce on computer monitors • Expensive to order and then return • Potential breakdown of human relationships |
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Look-to-click rate
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how many product impression are converted to click-throughs? This can help the e-tailer determine if the products featured on the Web site are the ones that customers want to see
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Click-to-basket rate
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how many click-throughs result in a product being placed in the shopping basket? This metric helps to determine if the detailed information provided about the product is appropriate.
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Basket-to-buy rate
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how many basket placements are converted to purchases? This metric can tell the e-tailer which kinds of products are more likely to be abandoned in the shopping cart instead of being bought. It can also pinpoint possible problems with the checkout process, such as forcing the shopper to answer too many questions or making her wait too long for her credit card to be approved
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Atmospherics
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the use of color, lighting, scents, furnishings, and other design elements to create a desired store image
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4 Retailing Alternatives
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• Central Business Districts
• Shopping Centers • Freestanding Stores • Non-Traditional Locations |
