Chapter 11

Retailing and Wholesaling

Previewing the Concepts: Chapter Objectives
1.
2.
3.
4.

Explain the role of retailers and wholesalers in the distribution channel.

Describe the major types of retailers and give examples of each.
Identify the major types of wholesalers and give examples of each.
Explain the marketing decisions facing retailers and wholesalers.
JUST THE BASICS

Chapter Overview
This chapter is a continuation of the prior chapter on marketing channels; it provides
more detail on retailing and wholesaling, two very important concepts in the value
delivery network.
It begins with a discussion of retailers and the challenges they face. There are many types
of retailers. These retailers can be classified according to several characteristics,
including the amount of service they offer, the breadth and depth of their product lines,
the relative prices they charge, and how they are organized.
Retailers are always searching for new strategies to attract and retain customers. The
major decisions retailers need to make are centered around their target market and
positioning, their product assortment and services, their price, their promotion strategies,
and where they are located.
Retailing is facing many challenges, including new retail forms, such as warehouse
stores. The wheel of retailing concept says that many new retailing forms begin as lowmargin, low-price, low-status operations. They challenge established retailers, and then
the new retailers success leads them to upgrade their facilities and offer more services. In
turn, their costs increase, and eventually they become like the conventional retailers they
replaced. The cycle begins again.
Wholesalers buy mostly from producers and sell mostly to retailers, industrial customers,
and other wholesalers. As a result, many of this countrys largest and most important
wholesalers are largely unknown to final consumers. Wholesalers provide important
services, however, and they add value through performing one or more of several
functions.
There are many types of wholesalers, including merchant wholesalers, agents and
brokers, and manufacturers sales branches and offices. They face many of the same

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decisions as retailers, including the choice of target market, positioning, and the
marketing mix.
The distinction between large retailers and large wholesalers continues to blur. Many
retailers now operate formats such as wholesale clubs and hypermarkets that perform
many wholesale functions. In return, many large wholesalers are setting up their own
retailing operations.
Chapter Outline
1.

Introduction
a.
Few retailers can compete directly with Wal-Mart. Yet, little Whole Foods
is thriving in the shadow of the giant.
b.
Whole Foods succeeds through careful positioningspecifically, by
positioning itself away from Wal-Mart. It targets customers that Wal-Mart
cant serve, offering them value that Wal-Mart cant deliver.
c.
Whole Foods value proposition is summed up in its motto: Whole
Foods. Whole People. Whole Planet. In keeping with the companys
positioning, most of the stores goods carry labels proclaiming organic,
100% natural, and contains no additives.
d.
Whole Foods has found its own very profitable place in the world.

2.

Retailing
a.
Retailing includes all the activities involved in selling products or services
directly to final consumers for their personal, nonbusiness use.
b.
Retailers are businesses whose sales come primarily from retailing.
c.
Nonstore retailing has been growing much faster than has store retailing.
Nonstore retailing includes selling to final consumers through direct mail,
catalogs, telephone, the Internet, TV home shopping shows, home and
office parties, door-to-door contact, vending machines, and other direct
selling approaches.
Use Key Terms Retailing, Retailer here.
Use Chapter Objective 1 here.
Use Discussing the Issues 1 here.
Types of Retailers
d.
Table 11-1 shows the most important types of retail stores.
Use Table 11-1 here.

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1.

Retailers can be classified by amount of service.

i.
Self-service retailers serve customers who are willing to
perform their own locate-compare-select process to save
money. Self-service is the basis of all discount operations
and is typically used by sellers of convenience goods and
nationally branded, fast-moving shopping goods.
ii.
Limited-service retailers provide more sales assistance
because they carry more shopping goods about which
customers need information.
iii.
Full-service retailers, such as specialty stores and first-class
department stores, offer salespeople who assist customers
in every phase of the shopping process.

Lets Discuss This

What type of service strategy is implemented at a 7-Eleven? At J.C. Penney? At Neiman
Marcus?
2.

Retailers can also be classified according to the length and breadth

of their product assortments.
i.
Specialty stores carry narrow product lines with deep
assortments within those lines.
ii.
Department stores carry a wide variety of product lines.
Service remains the key differentiating factor.
iii.
Supermarkets are the most frequently shopped type of retail
store.
iv.
Convenience stores are small stores that carry a limited line
of high-turnover convenience goods.
v.
Superstores are much larger than regular supermarkets and
offer a large assortment of routinely purchased food
products, nonfood items, and services.
a.
Wal-Mart, Kmart, Target, and others offer supercenters, combination food and discount stores that
emphasize cross-merchandising.
vi.
Category killers feature stores the size of airplane hangars
that carry a very deep assortment of a particular line with a
knowledgeable staff.
vii.
Hypermarkets are huge superstores. Hypermarkets have
been very successful in Europe and other world markets,
but they have met with little success in the United States.

Use Key Terms Specialty Store, Department Store, Supermarket, Convenience Store,
Superstore, and Category Killer here.
Use Discussing the Issues 2 here.
Use Focus on Ethics here.

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3.

Retailers can be classified according to the prices they charge.

i.
A discount store sells standard merchandise at lower prices
by accepting lower margins and selling higher volume.
ii.
An off-price retailer buys at less-than-regular wholesale
prices and charges consumers less than retail.
a.
Independent off-price retailers are either owned and
run by entrepreneurs or are divisions of larger retail
operations.
b.
Most large off-price retailer operations are owned
by bigger retail chains.
iii.
Factory outlets sometimes group together in factory outlet
malls and value-retail centers, where dozens of outlet stores
offer prices as low as 50% below retail on a wide range of
items.
iv.
Warehouse clubs (or wholesale clubs or membership
warehouses) operate in huge, drafty, warehouselike
facilities and offer few frills.

Use Key Terms Discount Store, Off-Price Retailer, Independent Off-Price Retailer,
Factory Outlet, and Warehouse Club here.
Use Chapter Objective 2 here.
4.

The major types of retail organizations are described in Table 11-2.

i.
Chain stores are two or more outlets that are commonly
owned and controlled.
a.
A voluntary chain is a wholesaler-sponsored group
of independent retailers that engages in group
buying and common merchandising.
b.
A retailer cooperative is a group of independent
retailers that bands together to set up a jointly
owned, central wholesale operation and conducts
joint merchandising and promotion efforts.
ii.
Franchise systems are normally based on some unique
product or service; on a method of doing business; or on
the trade name, goodwill, or patent that the franchiser has
developed.
iii.
Merchandising conglomerates are corporations that
combine several different retailing forms under central
owner-ship.
Use Key Terms Chain Store, Franchise here.
Use Marketing at Work 11-1 here.

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Use Table 11-2 here.

Use Application Questions 1 here.
Use Linking the Concepts here.
Retailer Marketing Decisions
e.
Retailers are always searching for new marketing strategies to attract and
hold customers.
f.
Figure 11-1 shows the major marketing decisions retailers face.
Use Figure 11-1 here.
1.

2.

Retailers must first define their target markets and then decide how
they will position themselves in these markets.
i.
Too many retailers fail to define their target markets and
positions clearly. They try to have something for everyone and end up satisfying no market well.
Retailers must decide on three major product variables.
i.
The retailers product assortment should differentiate the
retailer while matching target shoppers expectations.
ii.
The services mix can also help set one retailer apart from
another.
iii.
The stores atmosphere is another element in the resellers
product arsenal.

Applying the Concept

You want to open a store that caters to the local college population. You will sell T-shirts,
sweatshirts, and other casual clothing favored by college students. How will you
differentiate your product assortment from the schools bookstore? What type of service
will you offer (keeping in mind the needs of the college students who are your target)?
What kind of store atmosphere will you provide?
3.

4.
5.

A retailers price policy must fit its target market and positioning,
product and service assortment, and competition.
i.
Most retailers seek either high markups on lower volume or
low markups on higher volume.
Retailers use any or all of the promotion toolsadvertising,
personal selling, sales promotion, public relations, and direct
marketingto reach consumers.
Retailers often point to three critical factors in retailing success
location, location, and location.

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i.
ii.
iii.

It is very important that retailers select locations that are

accessible to the target market in areas that are consistent
with the retailers positioning.
Central business districts were the main form of retail
cluster until the 1950s.
A shopping center is a group of retail businesses planned,
developed, owned, and managed as a unit.
a.
A regional shopping center, or regional shopping
mall, the largest and most dramatic shopping center,
contains from 40 to more than 200 stores.
b.
A community shopping center contains between 15
and 40 retail stores.
c.
Most shopping centers are neighborhood shopping
centers or strip malls that generally contain between
5 and 15 stores.
d.
A recent addition to the shopping center scene is the
so-called power center. These huge unenclosed
shopping centers consist of a long strip of retail
stores, each with its own entrance with parking
directly in front.
Use Key Term Shopping Center here.
Use Marketing at Work 11-2 here.
Use Application Questions 2 here.

The Future of Retailing

g.
Retailers operate in a harsh and fast-changing environment, which offers
threats as well as opportunities.
1.
New retail forms continue to emerge to meet new situations and
consumer needs, but the life cycle of new retail forms is getting
shorter.
2.
The wheel of retailing concept says that many new types of
retailing forms begin as low-margin, low-price, low-status
operations. They challenge established retailers that have become
fat by letting their costs and margins increase. The new retailers
success leads them to upgrade their facilities and offer more
services. In turn, their costs increase, forcing them to increase their
prices. Eventually, the new retailers become like the conventional
retailers they replaced. The cycle begins again.
Use Key Term Wheel of Retailing Concept here.
Use Discussing the Issues 5 here.
Use Application Questions 3 here.

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Use Under the Hood/Focus on Technology here.

3.
4.

Americans are increasingly avoiding the hassles and crowds at

malls by doing more of their shopping by phone or online.
Todays retailers are increasingly selling the same products at the
same price to the same consumers in competition with a wider
variety of other retailers.
i.
This merging of consumers, products, prices, and retailers
is called retail convergence.
ii.
This convergence means greater competition for retailers
and greater difficulty in differentiating offerings.

Lets Discuss This

Do you avoid the crowds at malls? Do your parents? Do you think that there could be a
backlash against the ever-larger malls and stores? Use the wheel of retailing concept to
think about consumers reactions to crowds, the same merchandise everywhere, and the
difficulty retailers have in differentiating themselves.
5.

6.

7.

8.

The rise of huge mass merchandisers and specialty superstores, the

formation of vertical marketing systems and buying alliances, and
a rash of retail mergers and acquisitions have created a core of
superpower megaretailers. They are shifting the balance of power
between retailers and producers.
Retail technologies are becoming critically important as
competitive tools.
i.
Progressive retailers are using advanced information
technology and software systems to produce better
forecasts, control inventory costs, order electronically from
suppliers, send email between stores, and even sell to
customers within stores.
Retailers with unique formats and strong brand positioning are
increasingly moving into other countries.
i.
U.S. retailers are still significantly behind Europe and Asia
when it comes to global expansion.
There has been a resurgence of establishments that, regardless of
the product or service they offer, also provide a place for people to
get together.
Use Linking the Concepts here.
Use Discussing the Issues 4 here.

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3.

Wholesaling
a.
Wholesaling includes all activities involved in selling goods and services
to those buying for resale or business use.
b.
Wholesalers are firms engaged primarily in wholesaling activity.
Use Key Terms Wholesaling, Wholesaler here.
Use Chapter Objective 3 here.
c.
d.

Wholesalers buy mostly from producers and sell mostly to retailers,

industrial consumers, and other wholesalers.
Wholesalers add value by performing one or more of the following
channel functions:
1.
Selling and promoting
2.
Buying and assortment building
3.
Bulk breaking
4.
Warehousing
5.
Transportation
6.
Financing
7.
Risk bearing
8.
Market information
9.
Management services and advice
Use Discussing the Issues 6 here.

Types of Wholesalers
e.
Wholesalers fall into three major groups as shown in Table 11-3.
Use Table 11-3 here.
1.

2.

Merchant wholesalers are the largest single group of wholesalers,

accounting for roughly 50% of all wholesaling.
i.
Full-service wholesalers provide a full set of services.
ii.
Limited-service wholesalers offer fewer services to their
suppliers and customers.
Brokers and agents do not take title to goods, and they perform
only a few functions. They generally specialize by product line or
customer type.
i.
A broker brings buyers and sellers together and assists in
negotiations.

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ii.

iii.

Agents represent buyers or sellers on a more permanent

basis.
a.
Manufacturers agents are the most common type of
agent wholesaler.
Manufacturers sales branches and offices are the third
major type of wholesaler.

Use Key Terms Merchant Wholesaler, Broker, Agent, Manufacturers Sales Branches and
Office here.
Wholesaler Marketing Decisions
f.
As with retailers, wholesaler marketing decisions include choices of target
markets, positioning, and the marketing mix. See Figure 11-2.
1.
Wholesalers must define their target markets and position
themselves effectively. They can choose a target group by size of
customer, type of customer, need for service, or other factors.
2.
Wholesalers must decide on product assortment and services,
prices, promotion, and place.
i.
The wholesalers product is the assortment of products
and services that it offers.
ii.
Price is an important decision. Wholesalers usually mark
up the cost of goods by a standard percentage, say 20%.
iii.
Most wholesalers are not promotion minded.
iv.
Place is importantwholesalers must choose their
locations, facilities, and Web locations carefully.
Use Chapter Objective 4 here.
Use Figure 11-2 here.
Trends in Wholesaling
g.
As the wholesaling industry moves into the 21st century, it faces
considerable challenges.
h.
The industry remains vulnerable to one of the most enduring trends of the
last decadefierce resistance to price increases and the winnowing out of
suppliers who are not adding value based on cost and quality.
i.
The distinction between large retailers and large wholesalers continues to
blur.
1.
Many retailers now operate formats such as wholesale clubs and
hypermarkets that perform many wholesale functions.
2.
In return, many large wholesalers are setting up their own retailing
operations.
j.
Wholesalers will continue to increase the services they provide to retailers.
k.
Many large wholesalers are now going global.
Use Marketing at Work 11-3 here.
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Travel Log
Discussing the Issues
1. Define both retailing and wholesaling. What are the primary differences between the
two?
Retailing includes all the activities involved in selling products or services directly to
final consumers for their personal, nonbusiness use. Wholesaling includes all activities
involved in selling goods and services to those buying for resale or business use. The
primary difference is that retailers sell to final consumers while wholesalers do not.
2. Distinguish between specialty stores, department stores, supermarkets, convenience
stores, superstores, and category killers. Give one example of each.
Specialty stores, such as Talbots and The Wild Bird Center, carry narrow product lines
with deep assortments within those lines. Department stores, such as Macys, carry a
wide variety of product lines. Supermarkets, such as Kroger, are the most frequently
shopped type of retail store. Convenience stores are small stores that carry a limited
line of high-turnover convenience goods. Superstores, like Super Target, are much
larger than regular supermarkets and offer a large assortment of routinely purchased
food products, nonfood items, and services. Category killers, like PETsMART, feature
stores the size of airplane hangars that carry a very deep assortment of a particular line
with a knowledgeable staff.
3. Describe the target market and positioning for each of the stores you listed in the
previous example. Do any of those markets overlap? If so, how does each store
differentiate itself on the basis of product assortment and services?
Student responses will vary based on responses to the previous question.
4. The popularity of non-store retailing is on the rise. What advantages do mail-order
catalogs, television shopping networks, and the Internet offer consumers? Do you
think non-store retailing will continue to grow?
Non-store retailing offers consumers convenience (ease of ordering, 24 hour service) and
selection not available in traditional stores. Student responses to the second part of the
question will vary.
5. Define retail convergence. Consider your own shopping preferences. Do you
frequent independently owned stores or shop primarily at larger chains? Why?
The merging of consumers, products, prices, and retailers is called retail convergence.
Such convergence means greater competition for retailers and greater difficulty in
differentiating offerings. The competition between chain superstores and smaller,
independently owned stores has become particularly heated. Because of their bulkbuying power and high sales volume, chains can buy at lower costs and thrive on smaller
margins. The arrival of a superstore can quickly force nearby independents out of
business. Student responses will vary for the second question.

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6. Describe the primary functions that wholesalers perform. How do those activities
affect the relationships that companies build with consumers? How do they impact
relationships with other channel partners?
Wholesalers provide the following functions: (1) Selling and promoting: Wholesalers
sales forces help manufacturers reach many small customers at a low cost. The
wholesaler has more contacts and is often more trusted by the buyer than the distant
manufacture. (2) Buying and assortment building: Wholesalers can select items and
build assortments needed by their customers, thereby saving the consumers much work.
(3) Bulk-breaking: Wholesalers save their customers money by buying in carload lots
and breaking bulk (breaking large lots into small quantities). (4) Warehousing:
Wholesalers hold inventories, thereby reducing the inventory costs and risks of
suppliers and customers. (5) Transportation: Wholesalers can provide quicker delivery
to buyers because they are closer than the producers. (6) Financing: Wholesalers
finance their customers by giving credit, and they finance their suppliers by ordering
early and paying bills on time. (7) Risk bearing: Wholesalers absorb risk by taking
title and bearing the cost of theft, damage, spoilage, and obsolescence. (8) Market
information: Wholesalers give information to suppliers and customers about
competitors, new products, and price developments. (9) Management services and
advice: Wholesalers often help retailers train their salesclerks, improve store layouts
and displays, and set up accounting and inventory control systems.
By helping companies warehouse, distribute, and sell their products more efficiently,
more reliably, and at a lower cost, wholesalers create customer value that leads to
stronger relationships both with channel partners and the final consumer.
Application Questions
1. The chapter opens with a discussion of Whole Foods. Have you shopped at Whole
Foods? What was your impression of the store? Would you shop there again? Are
you part of the chains target market? How does the chain compete with other
grocers?
Student responses will vary. Whole Foods succeeds through careful positioning
specifically, by positioning away from Wal-Mart. Rather than pursuing mass-market
sales volume and razor thin margins, Whole Foods targets a select group of upscale
customers and offers them organic, natural, and gourmet foods, all swaddled in Earth
Day politics.
2. Develop a table with the retail characteristics of amount of service, product line
length and breadth, relative prices, and organizational structure as the rows of the
table. Place the following retailers at the top of each column in the table: Best Buy,
Sears, Sams Club, Gap, Wal-Mart, and a local convenience store. Complete the cells
in the table by describing each of the retailers on each of the characteristics. What
implications can you draw from this table?
Student responses will vary, but answers should focus on differentiation based on service
level, product assortment, price, and structure.

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3. Visit Graingers Web site (www.grainger.com). Which of the channel functions

discussed in the chapter does Grainger perform? How does the wholesaler create
value for its customers? How does Grainger use its Web site to build customer
relationships?
Grainger offers buying and assortment building, bulk-breaking, warehousing,
transportation, and management services and advice. Through its branch network,
service centers, sales reps, catalog, and Web site, Grainger links customers with the
supplies they need to keep their facilities running smoothly everything from light bulbs,
cleaners, and display cases to nuts and bolts, motors, valves, power tools, and test
equipment. It operates on a simple value proposition: to make it easier and less costly
for customers to find and buy MRO supplies. It starts by acting as a one-stop shop for
products to maintain facilities. Beyond making it easier for customers to find the
products they need, Grainger also helps them streamline their acquisition processes. On
a broader level, it builds lasting relationships with customers by helping them find
solutions to their overall MRO problems. Acting as consultants, Grainger sales reps help
buyers with everything from improving their supply chain management to reducing
inventories and streamlining warehousing operations.

Under the Hood

Piggly Wiggly, a chain of grocery stores, has always focused on providing innovative,
customer-centered shopping experiences. In fact, the chain was the first to allow
customers to browse for their own groceries, rather than having a clerk behind a counter
retrieve needed items. Continuing with that tradition, Piggly Wiggly now offers Pay By
Touch, a technology that allows customers to pay for their groceries with the simple
touch of a finger. After completing a two-minute registration process, customers link
their unique fingerprint with payment information, including credit cards or checking
account numbers, and loyalty card accounts. When checking out, customers place a
finger on a small scanner located next to the register and the transaction is complete. No
credit cards or loyalty card required. Within a month of adding Pay By Touch technology
to its stores nationwide, nearly twenty percent of the stores non-cash customers had
signed on. And, according to loyalty card statistics, says Rich Farrell, vice president of
information services at Piggly Wiggly, customers are buying more than they used to. It
must be the ease of the purchasing process. When we first purchased this technology, we
were looking for a payment system that would enhance speed, convenience and security,
and this does all three.*
1. How comfortable are you with fingerprint scanning technology in a retail setting?
Would you complete the registration process and use the Pay By Touch technology
when checking out?
Student responses will vary.
2. How might Pay By Touch, and other retail technologies, help build relationships with
new consumers and grow relationships with loyal customers?

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Streamlining the payment process for customers adds value to Piggly Wigglys
products. In addition, the registration process and continual monitoring of customer
purchases allows the store to build a better picture of the individual customer and offer
more targeted products and services.
*See Andrea Orr, Piggly Wiggly Finds the Right Touch, July, 18, 2005, accessed at
www.extremenano.com.

Focus on Ethics
Large discount stores and superstores can wield enormous power and impact a
community. Because of their bulk-buying power and high sales volume, national chains
can buy at lower costs and thrive on smaller margins. By doing so, Wal-Mart has been
accused of destroying independents in countless small towns around the country. As a
result, the mega retailer has been the target of considerable criticism. Sam Walton once
responded to the criticism, saying, Of all the notions Ive heard about Wal-Mart, none
has ever baffled me more than this idea that we are somehow the enemy of small-town
America. Nothing could be further from the truth. Wal-Mart has actually kept quite a
number of small towns from becoming extinct by saving literally billions of dollars for
the people who live in them, as well as by creating hundreds of thousands of jobs in our
stores I dont want to be too critical of small-town merchants, but the truth is that a lot
of these folks just werent doing a very good job of taking care of their customers.
Whenever we put a Wal-Mart store into a town, customers would just flock to us from the
variety stores. With our low prices, we ended an era of 45 percent markups and limited
selection.**
1. What is your reaction to Sam Waltons remarks? Do you agree with his perspective?
Student responses will vary.
2. Does Wal-Mart have a responsibility to the small retailers it puts out of business?
Why or why not?
Student responses will vary.
3. Should communities be concerned about the plight of small businesses competing
with Wal-Mart? What are the benefits and drawbacks of having big box retailers in a
community? What, if anything, should city governments do to protect local retailers
from the threat of large retailers?
Student responses will vary.
**See http://www.emich.edu/public/geo/557book/c313.impactwalmart.html.

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GREAT IDEAS
Barriers to Effective Learning
1.

2.

3.

4.

5.

6.

7.

Retailing is generally not a difficult concept for students. However, the different
types of retailers should be thoroughly explained to the students to ensure their
understanding. Table 11-1 is an excellent resource in this regard. The differing
types of retail organizations are also critical to understand; Table 11-2 helps here.
The decisions retailers need to make will be easily understood with a review of
Figure 11-1. It is very clear in this figure that the marketing mix elements studied
earlier in the text are being applied in a retail environment. Explain carefully how
the type of retail organization chosen affects the marketing mix, and vice versa.
The wheel of retailing concept can be difficult to understand without a proper
explanation. Drawing a parallel to the product life-cycle concept is an aid in this.
Also, discuss with the students how retailing has changed from Main Street, to
the mall, megastores like Wal-Mart Supercenters, horizontal marketing systems,
and such.
Nonstore retailing should be familiar to students, but perhaps not by this name.
Many students may not realize that they are visiting a retailer when they buy
books or CDs from Amazon.com, or select an item from a catalog and order it
over the phone. Explain that this is an extension of the place variable of the
marketing mix, but it is still selling to ultimate consumers, so it is indeed a
retailing outlet.
Wholesaling, by contrast, could be a difficult subject for many students. Although
the concept was introduced in an earlier chapter, there is more detail here, and
there are many more terms for the students to learn. A careful review of the
introduction to this section, with a description of the various channel functions
wholesalers perform, will set the stage for the students ability to learn these
concepts.
The description of the types of wholesalers is brief but important. Examples will
help tremendously, even though most wholesalers, by their nature and as
discussed in the text, are virtually unknown to consumers. Some students,
however, might be familiar with distributors who service grocery stores and other
retail outlets from summer jobs or those held by family members. You can also
draw the parallel between stockbrokers and product brokers, because the function
is virtually the same, although the item being brokered is very different. A
stockbroker never takes ownership of the stock, however, just as a product broker
does not. A celebrity or sports agent can be the parallel descriptor for
manufacturers agents. Table 11-3 will be very helpful in this discussion.
As with retailers, the decisions wholesalers make revolve around the marketing
mix components. This concept should be easily grasped by students at this point.

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Student Projects
1.
2.
3.
4.

5.

6.
7.
8.

9.

How do retailers identify target markets? Explain the major strategies by which
retailers reach their target markets.
Cite several examples (not from the textbook) in each of the following categories:
department store, specialty store, convenience store, discount store, off-price
retailer.
Show how the elements of the marketing mix apply to retailers. Apply these
elements to the decision process for a major chain of convenience stores to open
an outlet on your college campus.
Take any three retail stores of your choice and evaluate the atmospherics
contained in each. What moods are established? Ask some customers of the stores
what they think about the atmosphere of the store. Ask the store manager what
atmosphere they are trying to project and why.
Considering the increased use of the Internet, what are the ramifications that you
think will affect retailing? How can retailers use the Internet to increase their
business? What do you see in the future for retailing? Have you ever bought a
retail item via the Internet? If so, describe your experience. If not, why have you
not purchased in this manner (what would it take to convert you to e-commerce)?
How can wholesalers use the Internet to increase their business? Provide an
example of how wholesalers can use the Internet to compete.
Find a wholesaler and interview them about functions, descriptions of duties, and
clients. What changes do they see in the future for wholesaling? How have the
computer and the Internet affected their business? How do they target markets?
Interview a retailer and get a description of the types of wholesalers they use.
What functions are performed by the wholesaler for the retailer? Why does the
retailer use a wholesaler? What is the retailers biggest problem (if any) with
using the wholesaler?
Do library or Internet research to determine what new forms of retailers and
wholesalers have emerged in recent years. What has caused the emergence? Have
any forms disappeared? If so, what and why?

Interactive Assignments
Small Group Assignment
1. Form students into groups of three to five. Each group should read the opening
vignette to the chapter on Whole Foods and then answer the following questions:
a. What is Whole Foods overall strategy?
b. Describe Whole Foods based on the types of retailers described in the text
via service, product line, prices, and organizational approach.
c. Describe the decisions that Whole Foods has made for each of the 4 Ps.
d. If you were a wholesaler, how would you approach Whole Foods to carry
your products?
Each group should share its findings with the class.

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Individual Assignment
1. Read the opening vignette to the chapter. Think about the answers to the
following questions:
a. What is Whole Foods overall strategy?
b. Suggest a positioning strategy for Whole Foods.
c. Describe the decisions that Whole Foods has made for each of the 4 Ps.
d. If you were a wholesaler, how would you approach Whole Foods to carry
your products? How would you position your company?
Share your findings with the class.
Think-Pair-Share
1. Consider the following questions, formulate an answer, pair with the student on
your right, share your thoughts with one another, and respond to questions from
the instructor.
a. What is retailing?
b. How is retailing different from wholesaling?
c. How can retailers be classified?
d. What are the three levels of service? How are they different?
e. Briefly characterize the various retail forms found in Table 13.1.
f. What is a category killer? What is a hypermarket?
g. Explain how a franchise works.
h. What are the benefits and drawbacks of a franchise?
i. How do retailers target a market?
j. How do retailers establish a position in the marketplace?
k. What is meant by a shortening retail life cycle?
l. Briefly characterize each of the wholesale forms mentioned in Table 13.3.
m. What are the functions of wholesalers? Can these be replaced? If so, how?
n. What do you think is the most dramatic trend in wholesaling?
Outside Example
Both Barnes & Noble and Borders have been described as category killers. These very
large book stores are fairly ubiquitous in shopping malls, strip malls, and downtown
locations in major cities. In addition to books, they carry music, newspapers, and
magazines, and generally will have small cafes within them to encourage customers to
hang around for a while.
Barnes & Noble established a major online presence in response to the early success of
Amazon.com. Borders has taken another tack for its online sales, teaming up with the
enemy, Amazon.com itself. These two giants have presence virtually everywhere you go,

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even cyberspace, and they have both largely squeezed out independent bookstores. Even
the movie Youve Got Mail! discusses the impact of this specific kind of category killer.
1. Discuss the kind of service you get at the stores. Are they self-service, limitedservice, or full-service retailers? How about their online stores?
2. If you have never visited one of these stores, visit one. What is the
atmosphere? What do you like about the store? What do you dislike?
3. Describe their targeting efforts for their physical store locations. What type of
customer is likely to go to a store versus buy on the Internet?
4. How do these two stores compete with Amazon.com when it comes to product
assortment? Can you differentiate them at all? If so, how?
5. Do you find these retailers comfortable as hang outs? Do you use them that
way yourself? Why or why not? Do they instill a sense of community?
Classroom Exercise/Homework Assignment
C&S Wholesale Grocers is New Englands largest food wholesaler and the second largest
in the United States. It distributes more than 53,000 items, including groceries, produce,
and nonfood items. They have more than 36 facilities in the United States, and serve
grocery stores on the East Coast and West Coast, and in Hawaii. Visit their Web site at
www.cswg.com.
1.

C&S is largely a wholesaler, but in looking at its press releases, you see that it
joined IGA, a retail outlet organized as a volunteer chain. Why would a
wholesaler join a retailer chain?

Student responses to this will vary, but C&S saw an opportunity. Fleming Foods has been
in bankruptcy and has dropped out of the IGA family. C&S took its place to solidify its
own place as the second largest wholesaler in the nation. It also wanted to further
expand its market. Finally, it is one of many firms joining the convergence of retailing
and wholesaling, as large retailers become wholesalers, and large wholesalers become
retailers.
2.

C&S distributes to both independent grocery stores and chains. With its long list
of customers, how might C&S develop its marketing strategy? Discuss all four
elements of the marketing mix: product, price, place, and promotion.

Again, student responses will vary. However, C&S will need to ensure that it has a
thorough product mix to serve the needs of its various customers. Because these
customers are located in many regions of the country, there will need to be some variety
in the products it carries; in Vermont, for instance, they probably dont sell any Taro
chips, which are a very big product in Hawaii.
As mentioned in the text, margins are very thin in the grocery business, at both the retail
and wholesale level. Therefore, C&S probably does not hold a lot of pricing power and
must constantly keep in mind the profit needs of its customers.

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Place is critical for wholesalersthey need a lot of space to take large shipments in from
producers, and then break bulk and ship the new assortment out to the local grocery
retail outlets. Therefore, they need to be outside major city centers, but close enough to
their retail customers to keep transportation costs down.
Finally, their promotional efforts may vary between the large chains and small
independents, but they must ensure that they do not break any laws that govern pricing
and its promotional aspects (this was covered in Chapter 10).
Classroom Management Strategies
This chapter can easily be covered in one standard class period. Although the terminology
will be new to students, particularly the types of retailers and wholesalers, the material
itself is easily understood as a general rule, and students will tend to be pretty familiar
with retailing in particular.
1.

2.

The majority of the class, perhaps 40 minutes in a 60-minute class, should be

spent on retailing. This can be broken down further, with 15 minutes on the Types
of Retailers, 15 minutes on Retailer Marketing Decisions, and 10 minutes on the
Future of Retailing. You can liberally use examples and the various questions
from the chapter in going through this material.
The remaining 20 minutes of the class will be spent on the Wholesaling section.
Here, it is very important that time be spent on discussing the various types of
wholesalers and what kinds of functions they perform. Students will be less
familiar with this type of business, so several examples should be gathered to
discuss in class. The Classroom Exercise/Homework Assignment provided
previously can be very useful.

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