ch.16 retailing, wholesaling and logistics

8/8/2019 Ch.16 Retailing, Wholesaling and Logistics

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Chapter 16 Managing Retailing,Wholesaling and Logistics

Prepared By:

Sujay Soni Roll no. 25R. K. Singh Roll no. 32

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KOTLER ONMARKETING

Successful marketing

strategies requiresintegrating retailers,

wholesalers, and

logistical

organizations.


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WHAT IS RETAILING????


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WHAT IS RETAILING

Retailing covers all the activities involved in thesale of goods and/or services to final consumers.

Any organization selling to final consumers

whether it is a manufacturer, wholesaler or

retailers is called retailer

It is defined on the basis on purpose of use andnot on the quantity.


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FACTORS AFFECTING THE CHOICE OF

RETAILER

1. Convenience of buying

2. Variety of selection

3. Quality of products freshness, purity, craftsmanship

4. Courtesy of salespersons

5. Integrity reputation for fairness in dealings

6. Services offered delivery, credit , returned goods privileges

7. Value offered for money.


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LEVEL OF SERVICE IN RETAILING

Four levels of service:

1. Self-service- Customers have to carry out their own locate compare select process.

Main motto is to save on operating costs. E.g. Ginger hotels, Fire cracker stores.

2. Self-selection - Customers find their own goods, although they can ask for assistance. E.g

Big Bazaar

3. Limited service Retailer gives some additional services like credit and good returns

privileges. Customer expect more information and assistance.

4. Full service Sales person are ready to assist in every phase of locate compare

select process. High staffing cost is the disadvantage.

E.g Small electronic shops, cosmetics shops.


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TYPES OF RETAIL STORES

Convenience Stores is a convenient place to shop , eithercentrally located downtown or in the neighborhood. Easy parking,

Fast check out and easy to find products add to the convenience.

Such stores meets the requirement of nearby people. E.g. nearby

Grocery stores

Shopping Stores attract customers from greater distances

because of the width and depth of their assortments. Such stores

are having displays, demonstration, information and

knowledgeable sales clerk. E.g V Mart, Westside etc.

Specialty Stores are those form which customers have developed

a strong attraction. Due to the reasons like level of service,

selection or reputation, customers will constantly buy at these

stores. E.g Pantaloon, Raymonds etc.


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HOW CONSUMER VIEW STORE PRODUCT

COMBINATION

Product Class Store type

Convenience Shopping Specialty

Convenience Will buy any brand

at most accessible

store

Shop around to find

better service

and/or lower prices

Prefer store. Brand

may be important

Shopping

Want some

selection but will

settle for

assortment at most

accessible store

Want to compare

both products and

stores mixes

Prefer store but

insist on adequate

assortment

Specialty

Prefer particular

product but like

place convenience

too

Prefer particular

product but still

seeking best total

product and mix

Prefer both store

and product


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MARKETING TIP FOR RETAILING

The image of the retail stores in the mind

of customers is more important than the

products it cater.

Retailers strategy planning must consider

potential customers attitude towards both

the product and stores.


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ESSENTIAL ELEMENTS FOR A SUCCESSFUL RETAIL

TRADE

In order to get success in retailing, the retailer must consider the followingfacts:

1. Selection of Proper Goods: The first essential condition or the success of aretailers business is that he should be able to select proper goods whichcan meet the requirement of his customers. For proper selection he shouldexercise his foresight, use his past experience and keep in view thechanging fashions.

2. Perfect Knowledge about Goods: A retailer should have through knowledgeabout the goods he deals in only then he will be able to satisfy hiscustomers and answer their questions.

3. Sales Policy: He should adopt the policy of buying in bulk and increase hissales by satisfying himself with a lower margin of profit instead of charginghigher prices and limiting his sales. By this policy he can also face any localcompetition from other retailers in the market.

4. Adequate Capital: Adequate capital is vital for the success of any business.A retailer should command adequate capital at his disposal because he hasto allow some credit facilities also to his customers.


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ESSENTIAL ELEMENTS FOR A SUCCESSFUL RETAIL

TRADE

5. Selection of suitable Business Location: It is very necessary that a

suitable business location should be selected. The place should be

easily accessible to the customers. What should be a suitable

location will depend on the nature of goods he deals in.

6. Necessary Business Education: He should be well versed with the art

of a salesmanship underlined the habits and temperament of his

customers.

7. Attractive Display and Advertisement: He should arrange things in an

attractive style as to attract more customers. Goods should be

prominently displayed. He should also advertise.

8. To provide Credit Facility: In modern times providing credit facilities

has also become necessary. For this, the retailer should know thatfinancial position of his customers and their habits also.


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THE WHEEL OF RETAILING CONCEPT.

The Wheel of Retailing concept states that new types

of retailers usually begin as low-margin, low-price, low-status operations, but later evolve into higher-priced,

higher-service operations, eventually becoming like the

conventional retailers they replaced.


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TYPES OF RETAILING DISTRIBUTION

1. Specialty Shop2. Departmental Shops

3. Supermarkets

4. Catalogue showroom retailers5. Discount houses

6. Convenience stores

7. Automatic vending8. Telephone and mail ordering

9. Door to door Selling


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SPECIALTY SHOP

A limited line store with distinct personality.

Caters to certain type of customers whom the

management or sales person knows well

Familiarity simplifies buying, speed turnover, cuts the cost

of obsolescence & style changes of customers.

Deals in high quality sports good, exclusive clothing orleather goods.


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DEPARTMENTAL STORES

Organized into many separate departments

Each department is like separate limited line specialty

stores

Vide variety of products

Provides additional services like credit, goods return and

home delivery.

Some market segments can be reached throughdepartmental stores only

E.g 7 seas mall, Wall mart, More


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SUPERMARKETS

Multi products lines

Price discounts is the cornerstone

Self service

Profit comes from high volume sales and not from high

traditional mark ups

Higher level of convenience.

E.g Subhiksha, Big Bazaar, Reliance fresh


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CATALOGUE SHOWROOM RETAILERS

Sells the products out of catalogues & displays

Tend to focus on well known manufacturers brand.

E.g. Jewelers showroom, Boutiques, cars showrooms.


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DISCOUNT HOUSES

Offers hard goods like cameras, TV appliances atsubstantial price cuts.

Mainly developed to clear the old lots of manufacturers of

non moving items.

E.g Annual sale of various garment manufacturers.


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CONVENIENCE STORES

Limited assortment (Product Lines)

Prices are higher than supermarkets

Pick up and fill in items like bread, milk, ice cream,beer etc.

E.g 6 to Ten shops


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AUTOMATIC VENDING

Vending machines are used

Higher initial cost and considerable operating

costs.

Provides easy access to products

Mainly used in public places

E.g Amul, Pepsi, Espresso Coffee. ATMs


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TELEPHONE & MAIL ORDERING

SYSTEM

Shopping from any place of convenience, home,office, gardens etc.

Mainly used for specialized goods

Retail stores dont want to carry the items havingvery few customers

Flourishing in Rural areas where shopping

options are less

E.gTele shopping, Asian sky shop.


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DOOR TO DOOR SELLING

Old but effective method

Cover less than 1% of total retailing

Meets the needs of Convenience and personal attention

Useful to force new products in markets

Expensive method of selling

Difficulty in contacting is more.

E.g. Ureka Forbes.


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RETAILING MARKETING DECISIONS

Target Market

Product Assortment and Procurement

Breadth

Depth


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Product-differentiation Strategy Possibilities

Feature exclusive national brands that are not

available at competing retailers

Feature mostly private branded merchandise

Feature blockbuster distinctive merchandise events

Feature surprise or ever-changing merchandise

Feature the latest or newest merchandise first



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Services and Store Atmosphere Pre purchase services include accepting telephone

and mail orders, etc.

Post purchase services include shipping

and delivery, etc. Ancillary services include general information,

check cashing, parking, etc.

Arrangement, lightings, Labelling

Price Decision High-markup, lower volume Low-markup, high volume



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Promotion Decision

Place Decision

General business districts (Downtown)

Regional shopping centers

Community centers

A location within a larger store



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CORPORATE RETAILING

Benefits available to corporate housescoming in the retail business are

Economies of Scale

Huge investment

Brand name

Qualified Staff

Market details in depth

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MARKETING TIP

Always develop the retailing marketingstrategy keeping in mind the needs and

mind set of Indian Women.

78% of retailing business is done by

women and balance 22% of retailing is

influenced by women in one or other

aspect.


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WHAT ISWHOLESALING?

Wholesalers are primarily engaged in buying

merchandise for resale to retailers, industrial ,

commercial, institutional users, export, or acting

as agents in such transactions.


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WHOLESALERS FUNCTIONS

Selling and promoting: Wholesalers sales forces help manufacturers reachmany small customers at a low cost. The wholesaler has more contacts and

is often more trusted by the buyer than the distant manufacturer.

Buying and Assortment Building: Wholesalers can select items and build

assortments needed by their customers, thereby saving the consumers

much work.

Bulk Breaking: Wholesalers save their customers money by buying incarload lots and breaking bulk.

Warehousing: Wholesalers hold inventories, thereby the inventory costs and

risks of suppliers and customers.

Transportation: Wholesalers can provide quicker delivery to buyers because

they are closer than the producers. Wholesalers make transportation

arrangement from the premises of manufacturers to their godowns and

from their godowns to the retail stores. They often maintain their own fleet

of vehicles for this purpose.


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WHOLESALERS FUNCTIONS

Financing: Wholesalers finance their customers by giving credit,and they finance their suppliers by ordering early and paying billson time, They generally purchase goods in cash basis from themanufacturers and sometimes also given advance to themanufacturers. Thus, the manufacturers need not wait till theirproducts are sold. The wholesalers help the retailers by selling thegoods on credit.

Risk Bearing: Wholesalers absorb risk by taking title and bearingthe cost of theft, damage, spoilage, and obsolescence. These risksmay occur on account of change in prices and demand spoilage ofgoods and bad debts.

Market Information: Wholesalers give information to suppliers andcustomers about competitors, new products and pricedevelopment.


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SERVICES TO MANUFACTURERS

Concentration on production

Helpful in Large Scale Production

Distribution Facilities

Helpful in Demand Analysis and Forecasting

Financing

WarehousingFacilities

Advantage of Advertisement

Help in price determination


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SERVICES OFWHOLESALERS TO

RETAILERS

Purchasing facilities Low Inventory

Risk Taking

Financial Assistance

Information about new products

Benefits of Specialization

Stability in Prices

Transport Facility

Consultancy Services

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TYPES OFWHOLESALERS

Based on the criterion of taking title of goods, Wholesalers

can be divided into two types:

1. Merchant Wholesalers: own (take title to) the goods they sell.

It actually owns takes title to- for some period of time

before selling to its customers

2. Agent middlemen: are wholesalers who do not own the goods

they sell. Their main purpose is to help in buying and selling.

They usually provide even fewer functions than the limited

function wholesalers. In certain trades, however they are

extremely valuable. They may operate at relatively low cost

sometimes 2 to 6 percent of their selling price.


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TYPE OF MERCHANTWHOLESALERS

A. Service Merchant Wholesalers

The categories under this are:

1. General merchandise wholesalers- carry a wide variety of non perishable

items such as hardware, electrical supplies, plumbing supplies, furniture,

drugs, cosmetics and automobile equipment.

2. Single Line (or general line) Wholesalers- Carry a narrower line of

merchandise than general merchandise wholesalers. For example, they

might carry only groceries, or wearing apparel, or certain types of

industrial tools or supplies.

3. Specialty Wholesalers- carry a very narrow range of products. A

consumer goods specialty wholesaler might carry only health foods or

oriental foods


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TYPE OF MERCHANTWHOLESALERS

B. Limited Function wholesalers: Provides only some wholesaling

functions. E.g. some functions like Anticipate needs, carries stock,

Delivery goods, Grant credit, Provides information & advice.

Drop shippers- own the goods and they sell but do not actually handle,

stock or deliver them. They get orders from wholesalers, retailers or

industrial users and pass these orders on to producers. As drop

shippers do not have to handle goods their operating costs are lower.

Truck Wholesalers- specialize in delivering goods which they stock in

their own truck. Handling perishable products in general demand

tobacco, candy potato chips, and salad dressings, truck wholesalers

may provide almost the same functions as full service wholesalers.

Mail order wholesalers- sell out of catalogs which may be distributed

widely to smaller industrial customers or retailers. These wholesalers

operate in the hardware, jewelry, sporting goods, and general

merchandise lines.


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TYPES OF AGENT MIDDLEMAN

1. Manufacturers Agent sells similar products for several non competing

manufacturers for a commission on what is actually sold. Such agents work

almost as members of each companys sales force but they are really

independent middlemen. Manufacturers agents account for more than half of

all agent middlemen,

2. Brokers bring buyers and sellers together. Brokers usually have a temporary

relationship with the buyer and seller while a particular deal is negotiated.

Their product is information about what buyers need and what supplies are

available. They aid in buyer seller negotiation. If the transaction is completed,

they earn a commission from whichever party hired them.

3. Commission merchants handle goods shipped to them by seller, complete the

sale and send the money minus their commission to each seller. Commission

merchants are common in agricultural markets where farmers must ship tobig city central markets. They need someone to handle the goods there as well

as to sell them.

4. Selling agent take over the whole marketing job of manufacturers not just the

selling function. A selling agent may handle the entire output of one or more

producers even competing producers with almost complete control of pricing.


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Target Market

Product Assortment and Services

Price Decision

Promotion Decision

Place Decision

Wholesaler marking functions


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Market Logistics

It includes planning the infrastructure toIt includes planning the infrastructure to

meet demand,meet demand,

Implementing and consulting the physicalImplementing and consulting the physical

flow of materials to destination at profit.flow of materials to destination at profit.

Market Logistics = Physical distribution +Market Logistics = Physical distribution +

Material management + Material FlowMaterial management + Material FlowSystemSystem


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Market Logistics

Supply Chain Management (SCM):Supply Chain Management (SCM):--

SCMSCM startsstarts beforebefore physicalphysical distribution,distribution, itit meansmeansstrategicallystrategically procuringprocuring thethe rightright inputsinputs (raw(raw materials,materials,

componentscomponents andand capitalcapital equipments),equipments), convertingconverting themthem

efficientlyefficiently intointo finishedfinished productsproducts andand dispatchingdispatching themthem toto

finalfinal destinationsdestinations..


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Market Logistics

Market logistics planning has four steps:Market logistics planning has four steps:

Deciding on the companys valueDeciding on the companys value

proposition to its customersproposition to its customers

Deciding on the best channel design andDeciding on the best channel design and

network strategy for reaching the customersnetwork strategy for reaching the customers

Developing operational excellence in sales forecasting,Developing operational excellence in sales forecasting,warehouse management, transportation management, andwarehouse management, transportation management, and

materials managementmaterials management

Implementing the solution with the best information systems,Implementing the solution with the best information systems,

equipment, policies, and proceduresequipment, policies, and procedures


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Market Logistics

Integrated logistics systems (ILS)Integrated logistics systems (ILS)

ILS = Conventional LS + ITILS = Conventional LS + IT

e.g. Bar code system, Satellite tracking etc.e.g. Bar code system, Satellite tracking etc.


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Market Logistics

MarketMarket--logistics Objectiveslogistics Objectives

Getting right goods to the right places at theGetting right goods to the right places at the

right time for the least costright time for the least cost

> Customer service = 1/ Distribution cost> Customer service = 1/ Distribution cost


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Market Logistics

MarketMarket--logistics Decisionslogistics Decisions

1. Order Processing1. Order Processing

Order

Order--toto--payment cyclepayment cycle

2. Warehousing2. Warehousing

Storage warehousesStorage warehouses-- Near production unit,Near production unit,

long period of timelong period of time

Distribution warehousesDistribution warehouses-- near service point,near service point,for short period of timefor short period of time


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3. Inventory3. Inventory

Inventory cost increases at an accelerating rateInventory cost increases at an accelerating rateas the customer service level approaches 100%as the customer service level approaches 100%

Order (reorder) pointOrder (reorder) point

OrderOrder--processing costsprocessing costs

InventoryInventory--carrying costscarrying costs

Market Logistics


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Figure 18.2: Determining Optimal Order Quantity


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Market Logistics

JustJust--InIn--Time production (JIT)Time production (JIT)

4. Transportation4. Transportation

ModesModes railrail

RoadRoad

ShippingShipping

PipelinePipeline

TrainTrain--shipship

AirAir--trucktruck

ContainerizationContainerization-- putting the goods in boxes to easyputting the goods in boxes to easythe transportationthe transportation


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The 1The 1--800800--Flowers.com site makesFlowers.com site makes

online ordering easyonline ordering easy


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Market Logistics

Organizational LessonsOrganizational Lessons

Companies should appoint a senior vice presidentCompanies should appoint a senior vice president

of logistics to be the single point of contact for allof logistics to be the single point of contact for all

logistical elementslogistical elements

The senior vice president of logistics should holdThe senior vice president of logistics should hold

periodic meetings with sales and operationsperiodic meetings with sales and operations

people to review inventory, etc.people to review inventory, etc.

New software and systems are the key toNew software and systems are the key toachieving competitively superior logisticsachieving competitively superior logistics

performance in the futureperformance in the future


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ch.16 retailing, wholesaling and logistics

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