Chapter 13:

Retailers, Wholesalers, and Their Strategy Planning

Retailing
Price Location
Key Economic Factors Affecting Consumers Retail Choice

Product Selection
Special Services Helpful Salespeople Fairness in Dealing

13-3

Types of Retailers
Expanded assortment and service
Specialty shops and department stores

Conventional offerings

Singleand limitedline stores

Expanded assortment and/or reduced margins/service Added convenience higher margins less assortment Expanded assortment reduced margins more information

Supermarkets, discount houses, mass-merchandisers, catalog showrooms, super centers

Telephone/mail order, vending machines, door-to-door, convenience stores, electronic shopping

Internet

Exhibit 13-1
13-4

Focusing on Convenience
Convenience (Food) Stores

Retail Formats that Focus on Convenience

Automatic Vending

Door-to-Door Selling

Telephone and Direct Mail

13-5

Retailing on the Internet

Still in Infancy

Competition will bring Change

Wide Assortment

Costs are Deceptive

New Convenience

Shopping Differences
13-6

More Information

Retail Chains
Corporate Chains
Cooperative Chains

Major Types of Retail Chains

Voluntary Chains
Franchise Chains
13-7

The New Face of Wholesaling

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13-8

Producing Profits

Progress of Fail

New Strategies Needed to Survive

Types of Wholesalers
Does wholesaler own the products?

Yes (merchant wholesaler) How many functions does the wholesaler provide?
Some functions

No (agent middleman)

Agent middlemen

All the functions

Limited-function merchant Wholesalers

Service merchant wholesalers

Exhibit 13-6
13-9

Types of Merchant Wholesalers

Rack Jobbers
General Merchandise

Catalog

Types of Merchant Wholesalers

Single- or General-Line
Specialty

Truck

Cash-and-Carry

13-10

Drop-Shippers

Types of Agent Middlemen

Manufacturers Agents

Auction Companies

Types of Agent Middlemen

Brokers

Other types of Specialists

Selling Agents

13-11

Distribution & Place and

Development of Channel Systems

Marketing Channels

Sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

Channels and Marketing Decisions

Push Strategy

Pull Strategy

The Anderson Distribution Strategy Pyramid Distribution Objectives

Strategy Channel Design Network Strategy Structure Intermediate Management Warehouse & Transport Materials Management Process IT Policies & Procedures Facilities & Equipment Channel Management Implementation

Developing Channels Design

Distribution Processes Setting/ Achieving Distribution Objectives Controlling Distribution

Inventory management through a periodic review of network Integrated supply chain planning Demand forecasting based on Consumer trend secondary

Setting up distribution strategy with alternatives

Consistently lower inventory levels in changing demand

Setting distribution objectives in line with the demand potential

Lower Inventories Lower trade spends( no attempts to boost sales where demand)
Controlling trade spends Controlling distributor expenses and service evils to prevent distributors from making

Monitoring of trade spends Monitoring of Distributor

Achieving distribution objectives by ensuring the right mix of direct coverage

Categories of Buyers
Habitual shoppers High value deal seekers Variety-loving shoppers High-involvement shoppers

Buyer Expectations for Channel Integration

Ability to order a product online and pick it up at a convenient retail location Ability to return an online-ordered product to a nearby store Right to receive discounts based on total online and offline purchases

Should the 4 Ps be replaced?

Solutions Information Value Access

Channel Member Functions

Gather information Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers payment of their bills Oversee actual transfer of ownership

Designing a Marketing Channel System

Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives

Channel Service Outputs

Lot size Waiting/delivery time Spatial convenience Product variety Service backup

Identifying Channel Alternatives

Types of intermediaries Number of intermediaries Terms and responsibilities

Number of Intermediaries
Exclusive Selective Intensive

Channel-Management Decisions
Selecting channel members Training channel members Motivating channel members Evaluating channel members Modifying channel members

Channel Integration and Systems

Vertical marketing systems Corporate VMS Administered VMS Contractual VMS Horizontal marketing systems Multichannel systems

Managing Channel Conflict

Adoption of super ordinate goals Cooptation Diplomacy Mediation Arbitration

Strategy Decision Areas in Place

Place objectives Customer service level desired

Type of channel

Direct

Indirect

Type of physical distribution facilities needed

Degree of market exposure desired

Exhibit 11-1
11-3

Middlemen/ facilitators needed

How to manage channels

Why a Firm May Want to Use Direct Channels

Greater Control
Lower Cost

Value added subsequent to production process

Direct contact with Customer Needs

Some Reasons for Choosing Direct Channels

Quicker Response or Change in Marketing Mix

Suitable Middlemen Not Available

11-4

Regrouping Activities
Accumulating BulkBreaking

Sorting

Assorting

11-5

Managing Channel Relationships

Choosing the Type of Relationship Whole-Channel ProductMarket Commitment Key Issues in Channel Management Conflict Handling

Common Objectives

Role of Channel Captain

11-6

Vertical Marketing Systems

Type of channel Characteristics
Traditional
Administered Contractual Corporate

Vertical marketing systems

Amount of cooperation Control maintained by

Little or none None

Some to good Economic power and leadership General Electric

Fairly good to good Contracts

Complete One company ownership

Examples

Typical independents

McDonalds

Florsheim

Exhibit 11-3
11-7

Retailing

Includes all the activities involved in selling goods or services directly to final consumers for personal, nonbusiness use.

Major Retailer Types

Specialty store Department store Supermarket Convenience store Discount store Off-price retailer Superstore Catalog showroom

Levels of Retail Service

Self-service Self-selection Limited service Full service

Nonstore Retailing
Direct selling Direct marketing Automatic vending Buying service

Major Types of Corporate Retail Organizations

Corporate chain store Voluntary chain Retailer cooperative Consumer cooperative Franchise organization Merchandising conglomerate

Retailers Marketing Decisions

Target market Product assortment Service/store atmosphere Price Communication Location

Retail Category Management

Define the category Figure out its role Assess performance

Set goals
Choose the audience

Figure out tactics

Implement the plan

Retailer Services Mix

Pre purchase services Post purchase services Ancillary services

Location Decision
General business districts Regional shopping centers Community shopping centers Strip malls Location within a larger store

Indicators of Sales Effectiveness

Number of people passing by location Percentage who enter store Percentage of those who enter who also buy Average amount spent per sale

Trends in Retailing
New retail forms and combinations Growth of intertype competition Competition between store-based and non-store-based retailing Growth of giant retailers Decline of middle market retailers Growing investment in technology Global presence of major retailers

Wholesaling Functions
Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling

Major Wholesaler Types

Merchant Full service Limited service Brokers and agents Manufacturers Specialized

Wholesalers Marketing Decisions

Target market Product assortment Price Promotion Place