CH 13 Retailing and Wholesaling

Specialty store ---------------------------------------- Today, specialty stores are flourishing. The increasing use of market segmentation, market targeting, and product specialization has resulted in a greater need for stores that focus on specific products and segments.

A retail store that carries a narrow product line with a deep assortment within that line, such as apparel stores, sporting-goods stores, furniture stores, florists, and bookstores. Ex) REI, Sunglass Hut, Sephora, Williams-Sonoma

Superstore ---------------------------------- Some superstores that are actually giant specialty stores, the so-called category killers (for example, Best Buy, Home Depot, Petco, and Bed Bath & Beyond)

A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services. Walmart, Target, Meijer, and other discount retailers offer supercenters, very large combination food and discount stores. The average Walmart supercenter brings in about three times the sales of a traditional supermarket.

Off-price retailer -------------------------------- The three main types of off-price retailers are independents, factory outlets, and warehouse clubs

A store that sells merchandise bought at less-than-regular wholesale prices and sold at less than retail. -A retailer that buys at less-than-regular wholesale prices and sells at less than retail. --These include factory outlets owned and operated by manufacturers; --independent ...... owned and run by entrepreneurs or by divisions of larger retail corporations; --and warehouse (or wholesale) clubs selling a limited selection of goods at deep discounts to consumers who pay membership fees. ex) Mikasa (factory outlet); TJ Maxx (independent off-price retailer); Costco, Sam's Club, BJ's (warehouse clubs)

manufacturers' and retailers' branches and offices

Finally, .... are wholesaling operations conducted by non-wholesalers to bypass the wholesalers.

merchant wholesalers

First, .... take possession of the goods. They include full-service wholesalers and limited-service wholesalers.

Retailer cooperative -types of retail organizations

Group of independent retailers who jointly establish a central buying organization and conduct joint promotion efforts. ex) Associated Grocers (groceries), Ace Hardware (hardware)

product and services assortment, price, promotion, and place.

Guided by strong targeting and positioning, retailers must decide on a retail marketing mix...

adding value

Like retailers, wholesalers must target carefully and position themselves strongly. And, like retailers, wholesalers must decide on product and service assortments, prices, promotion, and place. Progressive wholesalers constantly watch for better ways to meet the changing needs of their suppliers and target customers. They recognize that, in the long run, their only reason for existence comes from .........., which occurs by increasing the efficiency and effectiveness of the entire marketing channel. As with other types of marketers, the goal is to build value-adding customer relationships.

the rise of megaretailers, the growing importance of retail technology, a surge in green retailing, and the global expansion of major retailers.

Other trends in retailing include

product assortment, services mix, and store atmosphere.

Product Assortment and Services Decision Retailers must decide on three major product variables:

omni-channel consumers

Recent dramatic shifts in how today's connected consumers shop and buy have caused a massive upheaval in the retailing industry. Today's buyers are.......who work across multiple channels as they shop, changing the role of retail stores in the buying process. ---------------------------------------------------------- As Amazon and other online merchants have boomed, traditional store retailers have struggled.

target market and positioning, products and services assortment, and competition. ------------------------------------------------------------------- Finally, it's very important that retailers select locations that are accessible to the target market in areas that are consistent with the retailer's positioning. -place decision

Retail stores are much more than simply an assortment of goods. Beyond the products and services they offer, today's successful retailers carefully orchestrate virtually every aspect of the consumer store experience. A retailer's price policy must fit its.........

New retail forms continue to emerge.

Retailers operate in a harsh and fast-changing environment, which offers threats as well as opportunities. Following years of good economic times, retailers have now adjusted to the new economic realities and more thrift-minded consumers.

brokers and agents

Second, ....do not take possession of the goods but are paid a commission for aiding companies in buying and selling.

omni-channel retailing

Successful retailers of the future must adopt ........, creating a seamless cross-channel buying experience that integrates in-store, online, and mobile shopping.

First, merchant wholesalers take possession of the goods. They include full-service wholesalers and limited-service wholesalers. Second, brokers and agents do not take possession of the goods but are paid a commission for aiding companies in buying and selling. Finally, manufacturers' and retailers' branches and offices are wholesaling operations conducted by non-wholesalers to bypass the wholesalers.

Wholesalers fall into three groups

category killer

a giant specialty store that carries a very deep assortment of a particular line -Deep in category with sales staff

corporate chains, voluntary chains, retailer cooperatives, and franchise organizations.

four major types of retail organizations

Retailing

includes all the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use. -------------------------------------------------------- Many institutions—manufacturers, wholesalers, and retailers—do retailing. But most retailing is done by retailers

Self-service retailers --------------------------------------------- Self-service is the basis of all discount operations and is typically used by retailers selling convenience goods (such as supermarkets) and nationally branded, fast-moving shopping goods (such as Target or Kohl's).

serve customers who are willing to perform their own locate-compare-select process to save time or money.

Retailer

A business whose sales come primarily from retailing. ------------------------------------------------------ We all know that Costco, Home Depot, Best Buy, and Trader Joe's are retailers, but so are Amazon.com, the local Hampton Inn, and a doctor seeing patients.

Franchise organization -types of retail organizations ------------------------------------------------ The main difference between franchise organizations and other contractual systems (voluntary chains and retail cooperatives) is that franchise systems are normally based on some unique product or service; a method of doing business; or the trade name, goodwill, or patent that the franchisor has developed.

Contractual association between a franchisor (a manufacturer, wholesaler, or service organization) and franchisees (-independent businesspeople who buy the right to own and operate one or more units in the franchise system). ex) McDonald's, Subway, Pizza Hut, Jiffy Lube, Meineke Mufflers, 7-Eleven

Challenges Resistance to price increases ----Whenever you add a member to the value chain then the prices always go up not downs Lack of suppliers Changing customer needs -----Sometimes they want to sidestep the wholesaler because they can find customer through online means Adding value by increasing efficiency and effectiveness

Trends in wholesaling

Corporate chain -types of retail organizations

Two or more outlets that are commonly owned and controlled. ... appear in all types of retailing but they are strongest in department stores, discount stores, food stores, drugstores, and restaurants. ex) Macy's (department stores), Target (discount stores), Kroger (grocery stores), CVS (drugstores)

Wholesaling ----------------------------- Selling and promoting Buying assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice ---------------------------------------------- Wholesalers can take ownership and creative ownership that can create financing for retailers. It helps with moving things around It can reclaim and borrow products from one retailer and shift it to another retailer like when there is a natural disaster - harder for bigger box retailers such as lowes and home depot Allow smaller retailers to take more risk A value creator in the distribution value chain

includes all the activities involved in selling goods or services to those who are buying for resale or business use.

Conventional distribution channel

begins with the producer/manufacturer, that goes to the wholesaler, and then goes to the retailer and then to the end consumer

shopper marketing -------------------------------------------- Shopper marketing builds around what P&G has long called the "First Moment of Truth"—the critical three to seven seconds that a shopper considers a product on a store shelf. However, with the dramatic growth of online and mobile shopping, the retailing "moment of truth" no longer takes place only in stores. Instead, Google defines a "zero moment of truth" and "micro-moments," brief seconds of decision making when consumers turn to their online or mobile devices to search for, learn about, or buy something.

focusing the entire marketing process—from product and brand development to logistics, promotion, and merchandising—toward turning shoppers into buyers as they move along toward the point of sale.

Shopper marketing --------------------------------------------------- Of course, every well-designed marketing effort focuses on customer buying behavior. What differentiates the concept of shopper marketing is the suggestion that these efforts should be coordinated around the customer's buying journey itself.

involves focusing the entire marketing process on turning shoppers into buyers as they move along toward the point of sale, whether during in-store, online, or mobile shopping.

Retailers ----------------------------------------------- Service differentiation among retailers has also eroded. Many department stores have trimmed their services, whereas discounters have increased theirs.

play an important role in connecting brands to consumers in the final phases of the buying process.

full-service retailers

retailers, such as high-end specialty stores (for example, Tiffany or Williams-Sonoma) and first-class department stores (such as Nordstrom or Neiman Marcus), assist customers in every phase of the shopping process. ..... stores usually carry more specialty goods for which customers need or want assistance or advice. They provide more services, which results in much higher operating costs. These higher costs are passed along to customers as higher prices.

wheel -of - retailing concept

states that many new types of retailing forms begin as low-margin, low-price, low-status operations, and challenge established retailers. As they succeed they upgrade their facilities and offer more services, increasing their costs and forcing theme to increase prices, eventually becoming the retailers they replaced

limited-service retailers

such as Macy's or JCPenney, provide more sales assistance because they carry more shopping goods about which customers need information. Their increased operating costs result in higher prices.

omni-channel buyers

who make little distinction between in-store and online shopping and for whom the path to a retail purchase runs across multiple channels.

Voluntary chain -types of retail organizations

Wholesaler-sponsored group of independent retailers engaged in group buying and merchandising. ex) Independent Grocers Alliance (IGA), Western Auto (auto supply), True Value (hardware)

Retailing and wholesaling -Retailing, wholesaling, and channels are all a part of the value chain

consist of many organizations bringing goods and services from the point of production to the point of use.

Omni-channel retailing

creating a seamless cross-channel buying experience that integrates in-store, online, and mobile shopping

Wallstreet - DE Shaw & Co is where bezos had his start De shaw - hedge fund that bezos worked for after he finished school at prince Data - Whoever collects the data then you are king relentless .com was suggested as the first name for the book company Amazon the worlds largest river Moved to seattle to start the company July 1995 it went live The empty chair - is to represent that they are there for the customer, they need to have empathy for the customer Customer empathy - customer obsessed - customer ecstasy Used the cite to study customer behavior - time of day, how long they were there, what they put in but don't buy Profit: For the next 20 years amazon was not going to be profitable. It was all about the long term and got investors to go along with it. ----------Predatory pricing is not allowed but its a new market and completely new concept that regulators did not know how to handle it ----------No federal sales tax Lose money to put other companies out of business and gain a bigger share Did Not collect sales tax - so people would browse books and then buy at amazon to save some money Invited other businesses to sell through them to their customers - name brands and small entrepreneurs joined Gazelle strategy - like a cheetah you don't go after the strongest but rather the smaller and weaker ones such as the #7 publisher and then move up to #6 ---------Hunt down the weakest partners who they are working with. ---------Amazon - is it a wholesaler, retailer or a place for people to exchange goods ----------Walmart and amazon are the same in that they can mine the data ahead of time ----------Used market penetration pricing to enter the market - took a loss of profits

Amazon Case Study

Warehouse club - (also known as wholesale clubs or membership warehouses) ------------------------------------- -types of off-price retailers

An off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing, and other goods at deep discounts to members who pay annual membership fees.

Omni-channel buying calls for omni-channel retailing, integrating all available shopping channels and devices into a seamless customer shopping experience. ------------------------------------------------------- Omni-channel retailing goes beyond just helping in-store customers as they cross-shop on mobile devices. It requires carefully integrating the entire range of available shopping channels, both in-store and out, from discovery to purchase in the buying process. To that end, most large retailers are now boosting their online and digital selling options and linking them with stores. The key is to integrate these elements to create the critical seamless, anywhere, anytime, omni-channel shopping experience that today's customers seek.

The retail shopping process has changed radically in this age of websites, smartphones, mobile apps, social media, and other things digital. Today's omni-channel buyers shift easily across online and in-store channels throughout the buying process. They readily research products and prices online, shopping digitally from home, from work, in stores, or anywhere in between. This massive shift in how people shop calls for massive changes in how store retailers operate.

retail organizations (corporate chains, voluntary chains, retailer cooperatives, and franchise organizations).

Today, many retailers are banding together in corporate and contractual....

shopping center

a group of retail businesses built on a site that is planned, developed, owned, and managed as a unit ---------------------------------------------------------- A regional shopping center, or regional shopping mall, the largest and most dramatic shopping center, has from 50 to more than 100 stores, including two or more full-line department stores. It is like a covered mini-downtown and attracts customers from a wide area. A community shopping center contains between 15 and 50 retail stores. It normally contains a branch of a department store or variety store, a supermarket, specialty stores, professional offices, and sometimes a bank. Most shopping centers are neighborhood shopping centers or strip malls that generally contain between 5 and 15 stores. These centers, which are close and convenient for consumers, usually contain a supermarket, perhaps a discount store, and several service stores—dry cleaner, drugstore, hardware store, local restaurant, or other stores. Power centers are huge unenclosed shopping centers consisting of a long strip of retail stores, including large, freestanding anchors such as Walmart, Home Depot, Costco, Best Buy, Michaels, PetSmart, and Office Depot. Each store has its own entrance with parking directly in front for shoppers who wish to visit only one store. By contrast, lifestyle centers are smaller, open-air malls with upscale stores, convenient locations, and nonretail activities, such as a playground, skating rink, hotel, dining establishments, and a movie theater complex.

service retailer ------------------------------------------- for many retailers, the product line is actually a service Service retailers in the United States are growing faster than product retailers.

a retailer whose product line is actually a service; examples include hotels, airlines, banks, colleges, and many others

broker

a wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation

Wholesaler -------------------------------------- The distinction between large retailers and large wholesalers continues to blur. Many retailers now operate formats such as wholesale clubs and supercenters that perform many wholesale functions ------------------------------------ Because wholesalers operate behind the scenes, they are largely unknown to final consumers. But they are very important to their business customers. Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers, and other wholesalers.

A firm engaged primarily in wholesaling activities.

supermarket ---------------------------------------- are the most frequently visited type of retail store. however, they are facing slow sales growth because of slower population growth and an increase in competition from discounters (Walmart, Costco, and Dollar General) on the one hand and specialty food stores (Whole Foods Market, Trader Joe's, ALDI, Sprouts, Lidl) on the other.

A large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of grocery and household products.

Supermarket

A relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve the consumer's total needs for grocery and household products. ex) Kroger, Publix, Safeway, SuperValu

Convenience store

A relatively small store located near residential areas, open 24/7, and carrying a limited line of high-turnover convenience products at slightly higher prices. -Limited line of high- turnover goods -A small store, located near a residential area, that is open long hours seven days a week and carries a limited line of high-turnover convenience goods. ex) 7-Eleven, Circle K, Speedway, Sheetz

Department store --------------------------------------------------- In recent years, mainstream department stores have been squeezed between more focused and flexible specialty stores on the one hand and more efficient, lower-priced discounters on the other. In response, many have added promotional pricing to meet the discount threat. Others have stepped up the use of store brands and single-brand shop-in-shop concepts to compete with specialty stores.

A retail store that carries a wide variety of product lines, each operated as a separate department managed by specialist buyers or merchandisers.

Department store

A retail store that carries several product lines—typically clothing, home furnishings, and household goods—with each line operated as a separate department managed by specialist buyers or merchandisers. -Wide variety of product lines ex) Macy's, Neiman Marcus

Discount store ------------------------------ Retailers that feature low prices are discount stores and "off-price" retailers.

A store that carries standard merchandise sold at lower prices with lower margins and higher volumes. -A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. ex) Walmart, Target, Kohl's

Superstore

A very large store that meets consumers' total needs for routinely purchased food and nonfood items. This includes supercenters, combined supermarket and discount stores, and category killers, which carry a deep assortment in a particular category. -Non-food goods ex) Walmart Supercenter, SuperTarget, Meijer (discount stores); Best Buy, Petco, Staples, Bed Bath & Beyond (category killers)

Factory outlet ------------------------------------- -types of off-price retailers ---------------------------------------- manufacturer-owned and operated stores by firms such as J.Crew, Gap, Levi Strauss, and others—sometimes group together in factory outlet malls and value-retail centers. These malls in general are now moving upscale—and even dropping factory from their descriptions. A growing number of outlet malls now feature luxury brands such as Coach, Polo Ralph Lauren

An off-price retailing operation that is owned and operated by a manufacturer and normally carries the manufacturer's surplus, discontinued, or irregular goods.

retail convergence -------------------------------------- This merging of consumers, products, prices, and retailers is called retail convergence. Such convergence means greater competition for retailers and greater difficulty in differentiating the product assortments of various types of retailers.

At the same time, however, different types of retailers are increasingly serving similar customers with the same products and prices....., making differentiation more difficult --------------------------------------------- different types of retailers now sell the same products at the same prices to the same consumers thanks in part to the pricing transparency the internet provides.

Price Decision

Most retailers seek either high markups on lower volume (most specialty stores) or low markups on higher volume (mass merchandisers and discount stores). -------------------------------------- All retailers would like to charge high markups and achieve high volume, but the two seldom go together. ------------------------------------------- Some retailers use no price promotions at all, competing instead on product and service quality rather than on price. Other retailers—such as Walmart, Costco, ALDI, and Family Dollar—practice everyday low pricing (EDLP), charging constant, everyday low prices with few sales or discounts. Still other retailers practice high-low pricing—charging higher prices on an everyday basis coupled with frequent sales and other price promotions to increase store traffic, create a low-price image, or attract customers who will buy other goods at full prices (Macy's, Kohl's, JCPenney, for example).

the amount of service they provide (self-service, limited service, or full service), breadth and depth of their product line sold (specialty stores, department stores, supermarkets, convenience stores, superstores, and service businesses), and relative prices (discount stores and off-price retailers) how they are organized (corporate chains, voluntary chains, retailer cooperatives, and franchise organizations.)

Retail stores come in all shapes and sizes, and new retail types keep emerging. Store retailers can be classified by.....

segmentation and targeting, store differentiation and positioning, and the retail marketing mix. ------------------------------------------------------------------- Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Those that try to offer "something for everyone" end up satisfying no market well. By contrast, successful retailers define their target markets well and position themselves strongly.

Retailers are always searching for new marketing strategies to attract and hold customers. They face major marketing decisions about..

—advertising, personal selling, sales promotion, PR, and direct and digital marketing— -------------------------------------------- Online, mobile, and social media tools are playing an ever-increasing role in helping retailers to engage customers.

Retailers use various combinations of the five promotion tools.........to reach consumers ---------------------------------- under promotion decision

Consistency is its middle name - profits 90% renewal rate on current members- killed sam's club MVR Costco 10% turnover, $20/hour wage - known for treating their employees well 50% market share 25% is the standard markup in supermarkets but costco only does 15% ¾ triggers - I go because I need my dog food. Products that are always there ¼ treasures- things that are there only shortly. Might not be there next week Knowing how many trigger and treasures to have they have a buyer profile The astix one the label means it is limited and wont continuously be there Alvarez peter wine buyer Ken fordem toy buyer Teddy for 29.99 that was originally over 100. They decrease price since they promised to buy so many units so its because of volume that they can produce it at that price # of items Walmart has 100K to 130K HT 35K.... About a 3-6 week sales cycle - if they haven't sold all of them then they will discount them (25-30% discounts) Costco 4,000

Video: Costco has the best business model

They went from a push method to a pull method. It went from manufacturer to the retailer with their barcode scanners who were monitoring the whole thing. Knew when and what was needed for the consumer. It changed how we received products Just in time - started being used with the additional technology Big box - refers to the retailer. They went from being a little box to the bix box in the distribution channel framework Push vs. pull - vendorville - if you were a manufacturer or supplier you have to go to Arkansas where you can meet with Walmart associates to get the product in Walmart Walmart knows everything about the companies and they hold the power against the people negotiating Walmart knows more about their markets than they do Lopsided negotiations between supplier and retailer rubbermaid - resin (one of their key elements to make their product) increased so they had to raise their prices but walmart didn't want them to. So Walmart dropped them as a client and then they basically went out of business because they couldn't meet the price demands of walmart. The barcode is one of the most important elements of the rise of walmart

Walmart case study:

"death by discount"

When reacting to economic shifts, retailers must be careful that their short-run actions don't damage their long-run images and positions. For example, cost-cutting and drastic price discounting can increase immediate sales but damage brand loyalty. One analyst calls this ...... and suggests that "virtually every retailer—at both the high and the low end—has fallen so deeply into the trap that discounting has become an expectation of customers rather than a bonus

Manufacturers' and retailers' branches and offices

Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

agent ------------------------------------------ Manufacturers' agents (also called manufacturers' representatives) are the most common type of agent wholesaler.

a wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods

merchant wholesaler ------------------------------------------- Wholesalers fall into three major groups: merchant wholesalers, brokers and agents, and manufacturers' and retailers' branches and offices.

an independently owned wholesale business that takes title to the merchandise it handles -------------------------------------------------- are the largest single group of wholesalers, accounting for roughly 50 percent of all wholesaling. include two broad types: full-service wholesalers and limited-service wholesalers.

Independent off-price retailer ------------------------------------- -types of off-price retailers

an off-price retailer that is either independently owned and run or is a division of a larger retail corporation An example is online furniture, home décor, bedding and bath, kitchen, and home improvement goods retailer