Retailing Retailing

11-2

What is Retailing?

• Retailing includes all the activities Retailing includes all the activities involved in selling products or involved in selling products or services directly to final consumers services directly to final consumers for their personal, non-business use.for their personal, non-business use.

11-3

Types of Retailers

Retailers are classified based on:

Amount of Service They Offer

Breadth & Depth of Product Lines

Relative Prices Charged

How They Are Organized

11-4

Amount of Service

• Self-Service Retailers:Self-Service Retailers:– Serve customers who are willing to Serve customers who are willing to

perform their own “locate-compare-perform their own “locate-compare-select” process to save money.select” process to save money.

• Limited-Service Retailers:Limited-Service Retailers:– Provide more sales assistance because Provide more sales assistance because

they carry more shopping goods about they carry more shopping goods about which customers need information.which customers need information.

• Full-Service Retailers:Full-Service Retailers:– Usually carry more specialty goods for Usually carry more specialty goods for

which customers like to be “waited on.”which customers like to be “waited on.”

11-5

Product Line ClassificationProduct Line Classification

Specialty Stores:Carry narrow product lines with deep assortmentswithin those lines, e.g jewelry,Books stores ,sports goods

Specialty Stores:Carry narrow product lines with deep assortmentswithin those lines, e.g jewelry,Books stores ,sports goods

Department Stores:Carry a wide variety of product lines—typically clothing, home furnishings, and household goods.Each line is operated as a separate departmentmanaged by specialist buyers or merchandisers.E.g- akbarally’s

Single line-shopper stop

Limited line- raymonds

Super speciality-all brands

Single line-shopper stop

Limited line- raymonds

Super speciality-all brands

11-6

Product Line Classification

Supermarket:Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products.e.g- foodland & garware

Convenience Stores:Small stores located near residential areas that are open long hours 7 days a week and carrya limited line of high-turnover convenience goods.

11-7

Web-Based Supermarket

In the battle for “share of stomachs,” Safeway and many large supermarkets have added Web-based sales.

11-8

Product Line Classification

Superstores:Much larger than regular supermarkets and offer a large assortment of routinely purchasedfood products, nonfood items, and services. Offer dry cleaning, shoe repair

Category Killers:Giant specialty stores that carry a very deepassortment of a particular line and is staffedby knowledgeable employees. e.g toys R U, home depot

11-9

•What type of impact did the What type of impact did the emergence of category killers emergence of category killers have on department stores?have on department stores?

Discussion Question

11-10

Relative Prices Classification

Discount Store:A retail institution that sells standard merchandiseat lower prices by accepting lower margins andselling at higher volume. e.g walmart, big bazaar

•Sells goods at discounted price•Carries national brands•Operational costs r min. as self service & no frills•Location in low rent areas, it draws customers

from distant areas

11-11

Off-Price Retailer:Retailer that buys at less-than-regular wholesaleprices and sells at less than retail. Examples arefactory outlets, independents, and warehouse clubs.

Factory Outlet:Off-price retailing operation that is owned and operated by a manufacturer and that normallycarries the manufacturer’s surplus, discontinued,or irregular goods.

Independent Off-Price Retailer:Off-price retailer that is either owned and run byentrepreneurs or is a division of a larger retailoperation.

11-12

Factory Outlets

Factory outlet malls and value-retail centers have blossomed in recent years, making them one of retailing’s hottest growth areas.

11-13

Relative Prices Classification

Warehouse Club:Off-price retailer that sells a limited selection ofbrand-name grocery items, appliances, clothing,at deep discounts to members who pay annual membership fees.

11-14

Organizational Classification

Chain Stores:Two or more outlets that are owned and controlled,have central buying and merchandising, and sell similar lines of merchandise.

Voluntary Chain:A wholesaler-sponsored group of independentretailers that engages in bulk buying and commonmerchandising.

11-15

Organizational Classification

Retailer Cooperative:A group of independent retailers that bands together to set up a jointly owned, centralwholesale operation and conducts jointmerchandising and promotion efforts.

Franchise:A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) whobuy the right to own and operate one or moreunits in the franchise system.

11-16

Franchising

Franchisees now command 35% of all retail sales in the U.S. Subway is one of the fastest growing franchises, with nearly 20,000 shops in 74 countries.

11-17

Retailer Marketing Decisions

11-18

Price, Promotion, & Place Decisions

Price policy must fit its target market and positioning, product and service assortment, and competition

Can use any or all of the promotion tools—advertising,personal selling, sales promotion, public relations,

and direct marketing—to reach consumers

Location-road infrastructure,power and public transportVisibility-ability to see the store,parking lo

11-19

Mall of America

• The Mall of America The Mall of America “megamall” contains:“megamall” contains:– Over 520 specialty Over 520 specialty

storesstores– 49 restaurants49 restaurants– 7-acre indoor 7-acre indoor

theme parktheme park– Underwater World Underwater World

featuring hundreds featuring hundreds of marine of marine specimensspecimens

– A two-story A two-story miniature golf miniature golf course.course.

11-20

Business model

• Low margin-high turnoverLow margin-high turnover– High operational efficiencyHigh operational efficiency– Economic drivers-Economic drivers- high inventory high inventory

turnover, low operating costturnover, low operating cost– Operating drivers-Operating drivers-

merchandise ,cost, sales productivity merchandise ,cost, sales productivity mgmt.mgmt.

11-21

Trends in retailing• New retails forms& New retails forms&

combinations-gas stations combinations-gas stations include food storesinclude food stores

• Shorter life spanShorter life span• Electronic age-non store Electronic age-non store

retailing via mail, tv, retailing via mail, tv, phonesphones

• Intertype competition-Intertype competition-discount store vs deptt. discount store vs deptt. StoreStore

• Deptt. Stores gave way to Deptt. Stores gave way to malls malls

• Technology-Pcs for Technology-Pcs for forecast, control inventory forecast, control inventory costs, scanning systems.costs, scanning systems.

• Unique formats & strong Unique formats & strong brand positioning. Mc, gapbrand positioning. Mc, gap

• Establishments provide Establishments provide people to congregate e.g people to congregate e.g tea shops, café coffee day, tea shops, café coffee day, book stores, pubsbook stores, pubs

11-22

Wholesaling

• Wholesaling includes all activities Wholesaling includes all activities involved in selling goods and services involved in selling goods and services to those buying for resale or business to those buying for resale or business use.use.

• Difference b/w wholesalers & retailersDifference b/w wholesalers & retailers– Less attention to promos, atmosphere, Less attention to promos, atmosphere,

location then retailerslocation then retailers– Transactions are larger ,cover large trade Transactions are larger ,cover large trade

areaarea– Govt. dealing will be differentGovt. dealing will be different

11-23

Functions Provided by Wholesalers

Selling & PromotingSelling & Promoting

Buying &Assortment Building

Buying &Assortment Building

Bulk-BreakingBulk-Breaking

WarehousingWarehousing

TransportationTransportation

FinancingFinancing

Risk BearingRisk Bearing

MarketInformation

MarketInformation

ManagementServices & Advice

ManagementServices & Advice

11-24

Types of Wholesalers

• Merchant Wholesalers- Merchant Wholesalers- independently owned business take title to independently owned business take title to merchandise they handlemerchandise they handle

– Largest group of wholesalersLargest group of wholesalers– Account for 50% of wholesalingAccount for 50% of wholesaling– Two broad categories:Two broad categories:

•Full-service wholesalersFull-service wholesalers•Limited-service wholesalersLimited-service wholesalers

– Cash n carry ,truck wholesalers, drop shippers, rack Cash n carry ,truck wholesalers, drop shippers, rack jobbers ,producers cooperatives, mail order jobbers ,producers cooperatives, mail order wholesalerswholesalers

11-25

Types of Wholesalers

• Brokers Brokers – Do not take title to Do not take title to

goods, Perform fewer goods, Perform fewer functionsfunctions

– Brokers bring buyers Brokers bring buyers and sellers togetherand sellers together

– Paid by party who hired Paid by party who hired themthem

– Do not carry inventory, Do not carry inventory, no finance, risk no finance, risk

– E.g food brokers, real E.g food brokers, real estate, insurance estate, insurance

• AgentsAgents– Agents represent Agents represent

buyers or sellers on buyers or sellers on more permanent basismore permanent basis

– Manufacturers’ agents –Manufacturers’ agents –written agreement onwritten agreement on• PricingPricing

• territoriesterritories

• delivery, order delivery, order procedureprocedure

– Apparel, furniture, Apparel, furniture, electrical goodselectrical goods

11-26

Types of Wholesalers

• Manufacturers’ Sales Branches Manufacturers’ Sales Branches and Officesand Offices– Wholesaling by sellers or buyers Wholesaling by sellers or buyers

themselves rather than through themselves rather than through independent wholesalers.independent wholesalers.

11-27

Wholesaling In ActionGrainger is by far the world’s leading wholesaler of maintenance, repair, and operating supplies.

200,000 products,520 branches

Satellite network

Online ordering

11-28

Wholesaler Marketing Decisions

11-29

11-30

Must Constantly Improve Services and Reduce CostsMust Constantly Improve Services and Reduce Costs

Distinction Between Large Retailers & Wholesalers is BlurryDistinction Between Large Retailers & Wholesalers is Blurry

Will Continue to Increase the Services Provided to RetailersWill Continue to Increase the Services Provided to Retailers

Wholesalers Are Now Going GlobalWholesalers Are Now Going Global

Trends in Wholesaling