Marketing 101: Chapter 11 - Retailing & Wholesale

OgilvyAction calles ...

"the last mile" - retailers are the final stop in the consumer's path to purchase

Wholesalers add value by performing one or more of the following channel functions

- Selling and promotion -Buying and assortment building -Bulk breaking - Warehousing -Transportation -Financing -Risk bearing -Market information -Management services and advice

How do brokers and agents differ from merchant wholesalers?

-They do not take title to goods -They perform only a few functions

Ex: Convenience stores

7-Eleven now stocks "tasty, healthy, fresh food choices."

Retailer

A business whose sales come primarily from retailing

Franchise

A contractual association between a manufacturer, wholesaler, or service organization (a franchisor) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system - Main dif b/w franchise and other contractual systems is that franchise systems are normally based on some unique product or service, a method of doing business, trade name/patent

Wholesaler

A firm engaged primarily in wholesaling activities

Category killer

A giant specialty store that carries a very deep assortment of a particular line (e.g. Best Buy, Home Depot, PetSmart)

Shopping center

A group of retail businesses built on a site that is planned, developed, owned, and managed as a unit

Supermarket

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

Discount store

A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume (e.g. Kohls, Target, Walmart)

Specialty store

A retail store that carries a narrow product line with a deep assortment within that line

Five promotion tools

Advertising, personal selling, sales promotion, PR, direct marketing

Wholesaling

All the activities involved in selling goods and services to those buying for resale or business use

Retailing

All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use

Merchant wholesalers

An independently owned wholesale business that takes title to the merchandise it handles

Types of limited-service wholesalers

Cash and carry wholesalers; truck wholesalers; drop shippers; rack jobbers; producers' cooperatives

Ex: Publix

Despite recent belt-tightening by consumers, the Publix supermarket chain has succeeded by lowering prices and helping customers get the most out of today's tighter food budgets

Ex: Discount store

Dollar General, the nation's largest small-box discount retailer, makes a powerful value promise for the times: "Save time. Save money. Every day."

Full-service retailers

E.g. high-end specialty stores (Tiffany, Williams-Sonoma, Nordstrom), carry more specialty goods for which customers need or want assistance or advice; higher services, higher operating costs, higher prices

Factory outlets sometimes group together in...

Factory outlet malls and value-retail centers

Types of agents

Manufacturers' agents; selling agents; purchasing agents; commission merchants

Three major groups of wholesalers

Merchant wholesalers, brokers and agents, and manufacturers' and retailers' branches and offices

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)

Retailers must decide on which three major product variables?

Product assortment, services mix, and store atmosphere

Ex: Wholesaler marketing

Progressive wholesalers like Grainger maintain an active presence in the social media. For example, on its YouTube channel, grainger offers more than 500 videos on topics ranging from the company and its products and services to keeping inventory costs down

Shopping center sizes by type

Regional shopping center/mall: Largest, 50-100 stores Community shopping center - between 15 and 50 retail stores Neighborhood shopping center/strip mall - between 5 and 15 stores

Diagram: Retailer marketing strategies

Retail strategy: (Retail segmentation and targeting/store differentiation and positioning) + Retail marketing mix (product and service assortment, retail prices, promotion, distribution) -> -> -> Create value for targeted retail customers

Ex: Green retailing

Safeway offers its own Bright Green line of home care products, including cleaning and laundry products made from biodegradable and naturally derived ingredients

Showrooming

The shopping practice of coming into retail store showrooms to check out merchandise and prices but instead buying from an online-only rival, sometimes while in the store; over 60% of shoppers say they look for deals online before at least half of all shopping trips

Shopper marketing

Using in-store promotions and advertising to extend brand equity to "the last mile" and encourage favorable point-of-purchase decisions

Two forms of contractual associations

Voluntary chain - a wholesaler-sponsored group of independent retailers that engages in group buying and common merchandising Retailer cooperative - group of independent retailers that bands together to set up a jointly owned, central wholesale operation and conduct joint merchandising and promotion efforts

Everyday low pricing (EDLP)

Walmart, Costco, Aldi, Family Dollar; charge constant, everyday low prices with few sales or discounts

Types of full service wholesalers

Wholesale merchants; industrial distributors

Full-service wholesalers

provide a full set of services

Retail technology

-Progressive retailers are using advanced IT and software systems to produce better forecasts, control inventory costs, etc. -Retailers are using this to connect with consumers -Increasing number of retailers are bringing online and digital technologies into their physical stores

Retailing trends and developments

-Tighter consumer spending -New retail forms, shortening retail life cycles, and retail convergence - The rise of megaretailers - Growth of direct, online, mobile, and social media retailling - Growing importance of retail technology - Green retailing - Global expansion of Major retailers

Franchises now command ___ percent of all retail sales in the US

40%

Off-price retailer

A retailer that buys at less-than-regular wholesale prices and sells at less than retail.

Service retailer

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

Convenience store

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 (e.g. 7-Eleven)

Superstore

A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services (e.g. Walmart, Target, Meijer, and other discount retailers offer supercenters)

Broker

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

Agent

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

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

Four major types of retail organizations

Corporate chains, voluntary chains, retailer cooperatives, and franchise organizations

Ex: Warehouse clubs

Costco is a retail treasure hunt, where one's shopping cart could contain a $50,000 diamond ring nestled on top of a vat of mayonnaise

Ex: retailer pricing

Discounter TJ MAxx provides a treasure hunt for bargain shoppers. "No sales. No gimmicks." Says the retailer. "Just brand name and designer fashions for you... for up to 60% off department store prices)

Ex: Value positioning

Facing tighter consumer spending, Home Depot adopted a thriftier theme: "More saving. More doing."

Ex: retail targeting and positioning

Five Guys Burger and Fries succeeds by positioning itself strongly away from McDonalds and other large fast food giants. The menu is limited, but what you can get at five guys you simply can't get at McDonalds

Self-service retailers

Serve customers who are willing to perform their own locate-compare-select process to save time or money -Self-service is the basis of all discount operations

Ex: Shopper marketing

The dramatic growth of digital shopping has added a new dimension to "point of purchase." Influencing customers' buying decisions as they shop now involves efforts aimed at in-store, online, and mobile shopping

ex: Retail technology

The future belongs to retailers who can blend in-store and online technologies into a seamless shopping experience. Here, an Eastern Mountain Sports associates uses an iPad app to help outfit a shopper for his next adventure

Retail convergence

The merging of consumers, products, prices, and retailers

Corporate chaines

Two or more outlets that are commonly owned and controlled (e.g. Macy's department stores, Target discount stores, Kroger grocery store, CVS drugstore) ;size allows them to buy in large quantieis at lower prices

Manufacturers' and retailers' branches and offices

Wholesaling by sellers or buyers themselves rather than through independent wholesalers

The most important types of retailers can be classified in terms of several characteristics, including:

amount of service, breadth/depth of their product lines, relative prices, and how they are organized

Experiential retailling

confirms that retail stores are much more than simply assortments of goods. They are environments to be experienced by the people who shop in them

limited-service wholesalers

offer fewer services to their suppliers and customers

Wholesalers marketing mix decisions

products and services; price; promotion; distribution

Department store

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

Like retailers, wholesalers must...

segment and define their target markets and differentiate and position themselves effectively - they cannot serve everyone

Retailers face major marketing decisions about..

segmentation and targeting, store differentiation and positioning, and retail marketing mix

Lifestyle centers

smaller, open-air malls with upscale stores, convenient locations, and nonretail activities

Independent off-price retailer

An off-price retailer that is either independently owned and run or is a division of a larger retail corporation

Warehouse club (aka wholesale clubs or membership warehouses)

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 ; E.g. Costco, Sam's Club, BJ's

Factory outlet

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

Ex: Experiential retailing

LL Bean has turned its flagship retail store in Freeport, Maine into an adventure center, where customers can experience goods before buying them

Ex: Wholesaler

Many of the nation's largest and most important wholesalers - like Grainger- are largely unknown to final consumers. But they are very well-known and much valued by the busienss customers they serve

Limited-service retailers

e.g. Sears or JC Penney; provide more sales assistance because they carry more shopping goods about which customers need information

Power center

huge, unenclosed shopping centers consisting of a long strip of retail stores, including large, free-standing anchors such as Walmart, Home Depot, Costco, BestBuy, etc;

Three main types of off-price retailers

independents, factory outlets, warehouse clubs

pop-up stores

limited time stores that promote brands to seasonal shoppers and create buzz in busy areas; online/mobile equivalent is flash sales