Market Chapter 13

Why are direct mail and catalogs an attractive form of non-store retailing?

(1) It can eliminate the cost of a store and clerks. (2) direct mail and catalogs improve marketing efficiency through segmentation and targeting, and they create customer value by providing a fast and convenient means of making a purchase. Finally, many catalogs now serve as a tool to encourage consumer to visit a website.

What two trends have caused a growth in the direct-selling industry?

(1) Many direct-selling retailers are expanding into markets outside of the United States. (2) The growing number of companies that are using direct selling to reach consumers who prefer one-on-one customer service and a social shopping experience rather than online shopping or big discount stores.

What advantage is online retailing to consumers?

24-hour access, the ability to comparison shop, in-home privacy and variety.

Strip Mall

A cluster of stores that usually serve people who are within a 5- to 10-minute drive consisting of gas stations, hardware, laundry, and pharmacy stores.

Business-Format Franchise

A franchisor provides step-by-step procedures for most aspects of the business and guidelines for most likely decisions a franchise will face.

What does a manufacturer's branch carry and perform?

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

Power Center

A variation of the strip mall which is a huge shopping strip with multiple anchor (or national) stores. Power centers are seen as having the convenient location found in many strip malls and the additional power of the national stores.They often have two to five anchor stores and combine a supermarket.

Retailing

All activities involved in selling, renting, and providing products and services to ultimate consumers for personal, family, or household use.

Direct Selling

Also called door-to-door retailing, involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office.

Category Management

An approach that assigns a manager the responsibility for selecting all products that consumers in a market segment might view as substitutes for each other, with the objective of maximizing sales and profits in the category.

A Franchise system (Contractual)

An individual or firm (franchisee) contracts with a parent company (the franchisor) to set up a business or retail outlet.

How are merchant wholesalers classified?

As either full-service or limited-service.

When do most retailers take markdowns?

As soon as sales fall off to free up valuable selling space and cash. Some stores delay markdowns to discourage bargain hunters and to maintain an image of quality.

What are the six forms of non-store retailing?

Automatic vending, direct mail and catalogs, television home shopping, online retailing, telemarketing, and direct selling.

What type of products do truck jobbers handle?

Bakery items, dairy products, and meat.

How is the retailing mix similar to the marketing mix?

Because it includes retail pricing, store location, retail communication, and merchandise.

Accelerated Development

Both Market share and profit achieve their greatest growth rates. Multiple outlets are established as companies focus on the distribution element of the retailing mix. In this stage, some later competitors may enter.

How are brokers and agents different?

Brokers usually have no continuous relationship with the buyer or seller buy negotiate a contract between two parties and then on to another task.

What are the two general types of franchises?

Business-format franchises and product-distribution franchises

General Merchandise (or full-line) Wholesalers

Carry a broad assortment of merchandise and perform all channel functions. (Hardware, drug and clothing industries). These wholesalers do not maintain much depth of assortment within a specific product line.

What are the 4 settings of store location?

Central business district, the regional shopping center, the strip mall, and and the power center.

Regional Shopping Centers

Consist of 50 to 150 stores that typically attract customers who live or within a 5- to 10-mile range. Often contain two or more anchor stores.

What do independent retailers offer its customers?

Convenience, personal service, and lifestyle compatibility.

What advantages does a corporate chain have?

Deal with manufacturers, particularly as the chain grows because a large chain can bargain with a manufacturer to obtain good, service or volume discounts on orders.

What are the two types of merchandise lines?

Depth of line and breadth of line

Merchandise line

Describes how many different types of products a store carries and what in what assortment.

Wheel of Retailing (Define and Explain)

Describes how new forms of retail outlets enter the market. Usually they enter as low-status, low-margin stores. Gradually these outlets add fixtures and more embellishments to their stores that increase the attractiveness for customers. With these improvements, status and price increases. As time passes, these outlets add more services and their status and prices increase even further. These outlets now face some new form of retail outlet that again appears as a low-status, low-margin operation and the wheel of retailing turns as the cycle starts to repeat itself.

Form of ownership

Distinguishes retail outlets based on whether independent retailers, corporate chains, or contractual systems own the outlet.

What are the four stages of the retail life cycle?

Early growth, accepted development, maturity and decline.

True or false? Agents and brokers take title to merchandise and typically perform all the channel functions?

False, agents and brokers do not take title to merchandise and typically perform fewer channel functions.

When are Manufacturer's agents used?

For automotive supply, footwear, and fabricated steel industries.

Drop shippers are used for what type of products?

For bulky products such as coal, lumber, and chemicals. (Sold in extremely large quantities).

How do agents and brokers make their profit?

From commissions or fees paid for their services.

How do merchant wholesalers make their profit?

From the sale of the merchandise they own.

Rack Jobbers

Furnish the rack or shelves that display merchandise in retail stores, perform all channel functions, and sell on consignment to retailers.

What are the two major types of full-service wholesalers?

General Merchandise (or fill-line) Wholesalers and Specialty merchandise (or limited-line) wholesalers.

What products are commonly sold by rack jobbers?

Hosiery, toys, housewares, and health and beauty items.

Markup

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

When is a cash and carry wholesaler common?

In electric supplies, office supplies, hardware products, and groceries.

In what form does retailing provide its consumers?

In the form of the utilities provided (time, place, form, possession).

Full-Service Outlet

Include most specialty stores and department stores and provide many services to customers such as free-exchanges, easy returns, gift cards, and clothing alterations.

Retailing Mix

Includes the activities related to managing the store and the merchandise in the store.

Brokers

Independent firms or individuals whose principal function is to bring buyers and sellers together to make sales.

What are the three forms of retail ownership?

Independent retailer, corporate chain, and contractual systems.

Merchant Wholesalers aka Industrial Distributor.

Independently owned firms that take title to the merchandise they handle.

Contractual systems

Involve independently owned stores that band together to act like a chain.

Corporate Chain

Involves multiple outlets under common ownership.

Off-price Retailing

Involves selling brand-name merchandise at lower than regular price.

What does online retailing allow consumer to do?

It allows consumers to search for, evaluate, and order products through the Internet.

What does a manufacturer's sales office carry and perform?

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

At what stage does the competition for battle share take place? What happens?

It is fought before the maturity stage, during the accelerated development stage. Some competitors drop out of the market.

Where does non-store retailing occur?

It occurs outside a retail outlet through activities that involve varying levels of customer and retailer involvement.

What are the two major types of agents used by producers?

Manufacturer's agents and selling agents.

What is one of the biggest problems online retailers face?

Nearly two thirds of online shoppers make it to the "checkout" and then leave the website to compare shipping costs and prices on other sites. Of shoppers who leave, 70% do not return.

What is the difference between Off-Price retailing and a store discount?

Off-price merchandise is bought by the retailer from the manufacturer with excess inventory at prices below wholesale prices. The discounter, however, buys at full wholesale prices but takes less of a markup than traditional department stores.

Specialty Merchandise (or limited-line) Wholesalers

Offer a relatively narrow range of products but have an extensive assortment within specific product lines carried. They perform all channel functions and are found in the health foods, automotive parts, and seafood industries.

Scrambled Merchandising

Offering several unrelated product lines in a single retail store.

What is the advantages of being an independent retailer?

Owner gets to be his own boss.

What is a negative of the central business district?

People usually view it as less convenient because of the lack of parking, higher crime rates, and exposure to the weather.

Retail Communication

Plays an important role in positioning a store and creating its image.

What is the most likely factor to influence consumers' assessment of merchandise value

Price

Who uses brokers?

Producers or seasonal products (fruits and vegetables) and in the real estate industry.

Limited-Service Outlet

Provide some services, such as credit and merchandise return, but not others such as clothing alterations.

What are the four major types of limited-service wholesalers that exist?

Rack jobbers, cash and carry wholesalers, drop shippers (or desk jobbers), and truck jobbers.

Breadth of Product Line

Refers to the variety of different items a store carries.

Selling Agents

Represent a single producer and are responsible for the entire marketing function of that producer. They design promotional plans, set prices, determine distributional policies, and make recommendations on product strategy.

Self-Service Outlet

Requires that customers perform many functions during the purchase process. Customers are co-creators of the value they receive.

What are the 4 elements of the retailing mix?

Retail pricing, store location, retail communication, and merchandise.

Everyday fair Pricing

Retailers that may not offer the lowest prices but try to create value for customers through service and the total buying experience.

Multichannel Retailers

Retailers that use a combination of traditional store formats and nonstore formats, such as catalogs, tevlevision and online retailing.

What are the two most popular measures for retailers?

Sales per square foot and same-store sales growth.

What are the three levels of service outlets?

Self-service, limited-service, full-service

Truck Jobbers

Small wholesalers that have a small warehouse from which they stock their trucks for distribution to retailers. They usually handle limited assortments of fast-moving or perishable items that are sold for cash directly from trucks in their original packages.

General Merchandise Stores

Stores that carry a broad product line with limited depth.

Limited-Line Stores

Stores that carry a considerable assortment (depth) of a related line of items.

Single-Line Stores

Stores that carry tremendous depth in one primary line of merchandise.

Cash and Carry Wholesalers

Take title to merchandise but sell only to buyers who call on them, pay cash for merchandise, and furnish their own transportation for merchandise. They carry a limited product assortment and do NOT make deliveries, extend credit, or supply market information.

Original Markup

The difference between retailer cost and the initial selling price.

Gross Margin or Maintained Markup

The difference between the final selling price and retailer cost.

Product-Distribution Franchise

The franchisor provides a few general guidelines and the franchisee is more independent.

Independent retailer

The independent business owned by a retailer. This is one of the most common forms of retail ownership.

Central Business District

The oldest retail setting, located in the community's downtown area.

When setting prices for merchandise what must retailers decide?

The price for markups, markdowns and timing of markdowns.

Retail Life Cycle

The process of growth and decline that retail outlets, like products, experience.

Early Growth

The stage of emergence of a retail outlet, with a sharp departure from existing competition. Market share rises gradually. Profits might be low because of startup costs.

Depth of Product Line

The store carries a large assortment of each item.

Shopper Marketing

The use of displays, coupons, product samples, and other brand communications to influence shopping behavior in a store.

How do consumers benefit from a corporate chain?

There are multiple outlets for them to shop at with similar merchandise and consistent management policies.

What makes a franchisor good?

They maintain strong control of the outlets in terms of delivery and presentation of merchandise and try to enhance recognition for the franchise name.

What is the key goal during the accelerated development stage?

To establish a dominant position in the fight for market share.

True or false retailing is the most dynamic aspect of a channel of distribution?

True

True or false, compared with direct mail, telemarketing is often viewed as a more efficient means of targeting consumers?

True

Who uses selling agents?

Used by small producers in the textile, apparel, food, and home furnishings industries.

Level of Service

Used to describe the degree of service provided to the consumer (self-service, limited-service, and full-service).

Telemarketing

Using the telephone to interact with and sell directly to consumers.

Drop Shippers (or Desk Jobbers)

Wholesalers that own the merchandise they sell but not physically handle, stock, or deliver it. They simply solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer.

Manufacturer's Branches and Sales Offices

Wholly owned extensions of the producer that perform wholesaling activities.

Manufacturer's Agents (or Manufacturer's representatives)

Work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory. They act as a producer's sales arm in a territory and are principally responsible for the transactional channel functions (selling).