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Retailing and Wholesaling

Retailing and Wholesaling. chapter 11. Harcourt, Inc. Objectives. Understand the role of retailing in the U.S. Describe the major types of retail institutional formats and explain the methods used to classify them Illustrate the importance of atmospherics. Objectives.

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Retailing and Wholesaling

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  1. Retailing and Wholesaling chapter 11 Harcourt, Inc.

  2. Objectives • Understand the role of retailing in the U.S. • Describe the major types of retail institutional formats and explain the methods used to classify them • Illustrate the importance of atmospherics Dr. Rosenbloom

  3. Objectives • Discuss the evolution of competition in retailing • Understand category management • Identify types of wholesalers • Explain how to select wholesalers and strategic renewal Dr. Rosenbloom

  4. Retail and Wholesale • Retailers perform the final steps needed to place merchandise in the hands of the consumer • Wholesalers provide retailers and other organizational buyers with merchandise but do not sell significant amounts to end consumers Dr. Rosenbloom

  5. Types of Retail Department Stores Convenience Stores Specialty Stores Category Killers 120-130,000 square feet Supermarkets Supercenters • Represent manufacturers with non-competing product lines. Work under contract within protected sales territories. Prices, delivery, service, warranties, and other handling are spelled out within the contract Dr. Rosenbloom

  6. Types of Retail Department Stores Specialty Stores Convenience Stores Category Killers 3000-7500 square feet Supermarkets Supercenters • Feature a deep assortment of products • Examples • Lady Footlocker, Naturalizer Shoes, Hallmark Card Shops, Tiffany’s, and collectible sports card shops Dr. Rosenbloom

  7. Types of Retail Tiffany & Co. McCann and Erickson Dr. Rosenbloom

  8. Types of Retail Department Stores Super-markets Convenience Stores Specialty Stores Category Killers Varied Size Supercenters • Self-service, centralized customer service, large-scale and low-cost, price emphasis, broad assortment of merchandise Dr. Rosenbloom

  9. Types of Retail Department Stores Super-centers Convenience Stores Specialty Stores Category Killers 120-160,000 square feet Supermarkets • Combination supermarket and department store • One stop shopping with up to a 30-50 mile radius in rural areas • Dominant new form of growth for major retailers Dr. Rosenbloom

  10. Types of Retail Department Stores Category Killers Convenience Stores Specialty Stores Varied Size Supermarkets Supercenters • The ultimate in specialty stores - carries tremendous specialized items • Examples • Toys ‘R’ Us, Carmax, AutoNation, etc. Dr. Rosenbloom

  11. Types of Retail Department Stores Convenience Stores Specialty Stores Category Killers 2-4000 square feet Supermarkets Supercenters • Serve a neighborhood with a radius of about 1.5 miles • Greater time, place, and possession utility • Lower turnover with higher prices Dr. Rosenbloom

  12. Types of Non-Store Retail Street Peddling Mail Order AutomaticMerchandising ElectronicShopping Direct Selling Dr. Rosenbloom

  13. Types of Non-Store Retail • Street Peddling • Oldest non-store format • Major U.S. metropolitan cities • Inexpensive Items Street Peddling Mail Order AutomaticMerchandising ElectronicShopping Direct Selling Dr. Rosenbloom

  14. Types of Non-Store Retail • Direct Selling • Personal basis • Tupperware, CUTCO, Avon • Move to cold-calling instead of canvasing Street Peddling Mail Order AutomaticMerchandising ElectronicShopping Direct Selling Dr. Rosenbloom

  15. Types of Non-Store Retail • Mail Order • Mail order houses • Catalogs such as L.L. Bean, Williams-Sonoma, Right Start, etc. Street Peddling Mail Order AutomaticMerchandising ElectronicShopping Direct Selling Dr. Rosenbloom

  16. Types of Non-Store Retail • Automatic Merchandising • Sale of products by vending machines (but not video games) Street Peddling AutomaticMerchandising Mail Order ElectronicShopping Direct Selling Dr. Rosenbloom

  17. Types of Non-Store Retail • Electronic Shopping • Home-based Internet shopping hurdles • Cost of being on-line • Payment fraud • Too many men, too few women • Loss of cultural tradition • Inadequate delivery services • Slow transmission rates • Possible channel conflict Street Peddling ElectronicShopping Mail Order AutomaticMerchandising Direct Selling Dr. Rosenbloom

  18. Classifying Retailers • Number of outlets • The more outlets, the stronger the retailer • But single-unit retailers are more motivated • 11 or more units is a chain-store (U.S. Census Bureau) Dr. Rosenbloom

  19. Classifying Retailers • Margins versus Turnover • Gross margin percentage • Inventory turnover - average number of times per year the retailer sells its inventory • Low GM generally means high turnover, or vice-versa Dr. Rosenbloom

  20. Classifying Retailers • Location, Location, Location • Geographic area is important for convenience factors • Business Districts • Historic first location for many retailers • High population density, high crime, bad traffic • Secondary and Neighborhood Business Districts have developed Dr. Rosenbloom

  21. Classifying Retailers • Location, Location, Location • Shopping Centers/Malls • Centrally owned, balanced tenancy • Neighborhood Center • Small, convenience goods, 3 mile range • Community Center • Small department store/category killer, 3-6 mile range Dr. Rosenbloom

  22. Classifying Retailers • Location, Location, Location • Shopping Centers/Malls • Regional Center • Major department store anchors, 5-15 mile range • Super-Regional Center • Regional + services and recreation, 5-25 mile range Dr. Rosenbloom

  23. Classifying Retailers • Location, Location, Location • Shopping Centers/Malls • Fashion/Specialty Centers • Upscale apparel, boutiques, entertainment/restaurants, 5-15 mile range • Power Centers • Several category killer, off-price, warehouse anchors, 5-10 mile range Dr. Rosenbloom

  24. Classifying Retailers • Location, Location, Location • Shopping Centers/Malls • Theme Centers • Historical interest, high tourist traffic • Outlet Centers • Manufacturer’s outlets Dr. Rosenbloom

  25. Classifying Retailers • Location, Location, Location • Freestanding Retailer • Not physically connected to other retailers • Along major traffic arteries • Haverty’s Furniture, Wal-Mart, etc. • Nontraditional Locations • Stores in airports, at colleges • Army and Air Force Exchange Services • Store-within-a-store concept Dr. Rosenbloom

  26. Atmospherics in Retailing • Retailers must attract customers and entice them to purchase • Quality and style of products • Employee helpfulness and reliability • Store fixtures, spacing • Appeal to the human senses • Music Dr. Rosenbloom

  27. Wheel of Retailing Supermarket + Bakery+ Delicatessen Supermarket + Bakery+ Delicatessen+ Florist Supermarket + Bakery New Entrant Supermarket Dr. Rosenbloom

  28. Wheel of Retailing • Retail Life Cycle (similar to Product Life Cycle) • Introduction • Growth • Maturity • Decline Introduction Growth Maturity Decline Dr. Rosenbloom

  29. Wheel of Retailing • Retail Life Cycle (similar to Product Life Cycle) Introduction Growth Maturity Decline Dr. Rosenbloom

  30. Wheel of Retailing • Category Management - managing and planning all stock keeping units (SKU) in a product category as a distinct business • Increased ability to get consumers into the store • Category manager defines category, retail sources, identifies major brands • Allows efficient stocking • Goal to achieve a certain profit per square foot Dr. Rosenbloom

  31. Types of Wholesaling Intermediaries • Agents, Manufacturers’ Branches, Merchant Wholesaler by percent of total sales Dr. Rosenbloom

  32. Types of Wholesaling Intermediaries • Agents, Manufacturers’ Branches, Merchant Wholesaler by percent of establishment Dr. Rosenbloom

  33. Types Of Wholesaling Intermediaries Sales Offices And Sales Branches Manufacturer’sOffices and Branches Sales Offices Sales Branches • Operate like an independent agent • The sales office performs functions similar to sales branch except that it does not carry inventory • Some goods need rigid distribution control • Other middlemen won’t handle the product line • Require complex installation/servicing Dr. Rosenbloom

  34. Types Of Wholesaling Intermediaries Merchant Wholesalers MerchantWholesalers Full Service Limited Service • General Wholesalers • Cash And Carry Wholesalers • Limited Line Wholesalers • Truck Jobbers • Specialty Line Wholesalers • Drop Shippers • Industrial Distributors • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  35. Types Of Wholesaling Intermediaries Merchant Wholesalers • Carry wide range of lines with little depth per line • Generally nonperishable: hardware, clothing, drugs, some foods, cosmetics, and tobacco products MerchantWholesalers Full Service • General Wholesalers • Limited Line Wholesalers • Specialty Line Wholesalers • Industrial Distributors Dr. Rosenbloom

  36. Types Of Wholesaling Intermediaries Merchant Wholesalers • Carry a narrow range of product lines but with great assortment of products within each line • Example: kitchen accessories MerchantWholesalers Full Service • General Wholesalers • Limited Line Wholesalers • Specialty Line Wholesalers • Industrial Distributors Dr. Rosenbloom

  37. Types Of Wholesaling Intermediaries Merchant Wholesalers • Specialize in only one or two product lines • Example: specialty line wholesaler of exotic fruits and vegetables MerchantWholesalers Full Service • General Wholesalers • Limited Line Wholesalers • Specialty Line Wholesalers • Industrial Distributors Dr. Rosenbloom

  38. Types Of Wholesaling Intermediaries Merchant Wholesalers • Stock inventory for resale to manufacturers • Relatively trivial manufacturer’s total purchasing requirements MerchantWholesalers Full Service • General Wholesalers • Limited Line Wholesalers • Specialty Line Wholesalers • Industrial Distributors Dr. Rosenbloom

  39. Types Of Wholesaling Intermediaries Merchant Wholesalers • Provide products in a warehouse setting for resale but do not deliver, extend credit or promotional support • Office supplies, groceries, auto supplies, and hardware products MerchantWholesalers Limited Service • Cash And Carry Wholesalers • Truck Jobbers • Drop Shippers • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  40. Types Of Wholesaling Intermediaries Merchant Wholesalers • Small wholesalers that sell directly from their trucks or vans to retailers for cash • Fruits, vegetables, dairy products, and snack foods often are distributed by truck jobbers MerchantWholesalers Limited Service • Cash And Carry Wholesalers • Truck Jobbers • Drop Shippers • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  41. Types Of Wholesaling Intermediaries Merchant Wholesalers • Sell products, take orders, and arrange for delivery directly to customers • Do not store, handle, or deliver any products • Lumber, coal, and building materials MerchantWholesalers Limited Service • Cash And Carry Wholesalers • Truck Jobbers • Drop Shippers • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  42. Types Of Wholesaling Intermediaries Merchant Wholesalers • Sell from catalogs. Store and deliver products, however, do not extend credit or provide promotional support • Jewelry, specialty foods, and automotive parts MerchantWholesalers Limited Service • Cash And Carry Wholesalers • Truck Jobbers • Drop Shippers • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  43. Types Of Wholesaling Intermediaries Merchant Wholesalers • Supply products and the display units on which the products are displayed • Stock the units, take orders, and control the retailer’s inventory and typically sell products on consignment MerchantWholesalers Limited Service • Cash And Carry Wholesalers • Truck Jobbers • Drop Shippers • Mail-order Wholesalers • Rack Jobbers Dr. Rosenbloom

  44. Bring buyers and sellers together but do not handle or store merchandise or extend credit. Food brokers, securities brokers and real estate brokers Selling Agents Perform all marketing functions No title to merchandise Manufacturer’s Agents Represent firms with non-competing product lines Types Of Wholesaling Intermediaries Agents and Brokers Agents AndBrokers Brokers Agents Dr. Rosenbloom

  45. Working with Wholesalers • Selecting a wholesaler • Assess management skills • Assess financial strength, integrity, history and future prospects • Assess equipment and facilities • Assess compatibility of objectivies and policies Dr. Rosenbloom

  46. Working with Wholesalers • Managing a wholesaler • Support a wholesaler with: • Planned gross margin (adequate profit) • National or regional advertising • Sales training program • Operational problem aid • Reasonable sales goals Dr. Rosenbloom

  47. Strategic Renewal in Wholesaling • Larger manufacturers and retail chains have attempted to bypass wholesalers • Strategic renewal helps make wholesalers vital and important to channel partners Adoption of technology Commitment to TQM Marketing support philosophy Dr. Rosenbloom

  48. Strategic Renewal in Wholesaling Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology Adoption of technology • Bar coding and scanning devices • Electronic data interchange (EDI) • Despite thin profit margins, technology investment is growing among wholesalers Commitment to TQM Marketing support philosophy Dr. Rosenbloom

  49. Total Quality Management Managing processes to improve outcomes perceived by customers Zero-defect customer service Helps manufacturers and retailers improve their own objectives Strategic Renewal in Wholesaling Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Commitment to TQM Adoption of technology Marketing support philosophy Dr. Rosenbloom

  50. Strategic Renewal in Wholesaling Marketing support philosophy Marketing support philosophy Marketing support philosophy Marketing support philosophy Marketing support philosophy Marketing support philosophy Marketing support philosophy Marketing support philosophy • Formerly wholesalers viewed themselves as extensions of suppliers or customers • Today many view themselves as marketing support for suppliers and customers • Willing to perform tasks to make more efficient channels Adoption of technology Commitment to TQM Dr. Rosenbloom

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