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