Chapter 17 Managing Retailing Wholesaling and Market Logistics

1. Retailing
a. All activities involved in selling goods & services directly to final consumer for
personal, non-business use.
2. Types of Retailers
a. Specialty Store: Narrow Product line with a deep assortment, such as apparel
stores, furniture stores, bookstores etc.
b. Department Store: Several Product lines-typical clothing, home furnishings and
household goods
c. Super market: Relatively large, low cost low margin, high volume, self service
operation designed to serve total needs for food, laundry and household
maintenance products
d. Convenience Store: Relatively small store located near residential area, open
long hours seven days a week and carrying a limited line of high turnover
convenience products at slightly higher prices
e. Discount store: Standard merchandise sold at lower prices with lower margins
and higher volumes
f. Off-Price Retailer: Merchandise bought at less than regular wholesale price and
sold at less than retail; often left over goods, overruns and irregulars obtained at
lower prices.
3. Retailers can position themselves as offering one of four levels of service:
a. Self-service: It is corner stone of all discount operations.
b. Self selection: Customers find their own goods, although they can ask for
assistance
c. Limited service: These retailers carry more shopping goods and customers need
more information and assistance
d. Full Service: Sales people are ready to assist in every phase of the locate-
compare-select process.
 4. By combining these different service levels with different assortment breadths, we can
distinguish the four broad positioning strategies available to retailers
a. Bloomingdale’s: Stores that feature a broad product assortment and high value
added, Pay high attention to store design, product quality, service and image.
Profit margin is high.
b. Tiffany: Narrow product assortment but high value added. Cultivate an exclusive
image and tend to operate on high margin and low volume.
c. Sun glass hut: narrow prod assortment and low value added, such stores keep
their costs and prices low by designing similar stores and centralizing buying,
merchandising and distribution
d. Wall Mart: Broad product line but low value added. Focus on keeping prices
low. High volume

Broad

Bloomingdale’s Wal-Mart
Breadth of Product line

Tiffany Kinney shoe

Narrow

Value added

High Low
 5. Non store Retailing falls into 4 major categories:
a. Direct selling
b. Direct marketing
c. Automatic vending
d. Buying services is a store less retailer serving a specific clientele-usually
employees of large organizations, who are entitled to buy from a list of retailers
who have agreed to give them discounts in return for memberships.
6. Major types of corporate retailing
a. Corporate chain stores: Two or more outlets commonly owned and controlled,
employing central buying and merchandising and selling similar lines of
merchandise.
b. Voluntary chains; A wholesaler sponsored group of independent retailers
engaged in bulk buying and common merchandising
c. Retailer cooperatives; Independent retailers who set up a central buying
organization and conduct joint promotion effort
d. Franchises;
e. Merchandising conglomerates: A free form corporation that combines several
diversified retailing lines and forms under central ownership along with some
integration of distribution and management

Target Market
A retailer’s most important decision concerns the target market. Periodic marketing research is a must to ensure
that they are reaching their target customers.

Product Assortment and procurement

 Must match the target market’s shopping expectations. The retailer has to decide on product-
assortment breadth and depth.
 The real challenge begins after defining the product assortment in terms of developing a
product-differentiation strategy. Some possibilities are:
o Feature exclusive national brands not available at competing retailers
o Feature mostly private branded merchandise
o Feature surprise or ever-changing merchandise
o Feature latest merchandise first
o Offer a highly targeted assortment
 Establish procurement policies, sources
Services and store atmosphere
 Decide on the services mix
o Pre-purchase services like accepting telephone and mail orders
o Post-purchase services like shipping and delivery
o Ancillary services like parking, restaurants etc.
 Atmosphere

Price decision
Most retailers fall into the high-markup, lower-volume group or the low-markup, higher-volume group.

Place decision
 General business districts
 Regional shopping centers
 Community shopping centers/ malls etc.

Trends in retailing
 New retails forms emerge but most of them face a short life span. They are rapidly copied
and quickly lose their novelty.
 Growth of non-store retailing: electronic age
 Competition becoming more intertype or between types of store outlets
 Retailers moving towards becoming either mass merchandisers or specialty retailers
 Departmental stores to malls, one-stop shopping
 Marketing channels are increasingly becoming professionally managed and programmed.
New store formats launched
 Technology as a competitive tool for inventory management, fund transfer etc.
 Retailers with unique formats and strong brand positioning are moving to other countries like
McDonalds etc
 Rise in establishments that provide a place for people to congregate such as coffee shops etc.

Wholesaling
It includes all the activities involved in selling goods or services to those who buy for resale or business use.
Wholesaling excludes manufac and farmers bcoz they r engaged primarily in production and it excludes
retailers.

When r wholesalers used?

When they are efficient in:
- Selling and promoting
- Buying and assortment building
- Bulk breaking
- Warehousing
- Transportation
- Financing
- Risk bearing
- Market information
- Management services and counseling
Types of wholesaling
Merchant wholesalers: Independently owned businesses that take title to the merchandise
they handle. They fall under two categories:
a. Full service wholesalers: carry stock, maintain a sales force, offer credit, make
deliveries and provide management services. There are 2 types of full-service
wholesalers: i) wholesale merchant: sell primarily to the retailers and provide a
full range of services. General line wholesalers carry one or two lines. Specialty
wholesalers carry only one part of line. ii) Industrial distributor sell to
manufacturer rather than to retailers and provide several services.
b. Limited service wholesalers: Offer fewer services to suppliers and customers.
Brokers and agents: do not take title to goods, perform few functions.
Brokers
Agents: Manufact agents, selling agents, purchasing agents, commission merchants,
Manufactures’ and Retailers’ Branches and Offices: Sales offices, Purchasing offices
Miscellaneous wholesalers: specialized wholesalers like agriculture assemblers, petroleum bulk
plants

WHOLESALER MARKETING DECISION

1. Target Market
2. Product Assortment and Services
3. Price Decision
4. Promotion Decision
5. Place Decision

MARKET LOGISTICS
It involves planning, implementing and controlling the physical flows of materials and final goods from points
of origin to points of use to meet customer requirements at a profit.
Each market logistics system will lead to following costs
M = T+ FW + VW +S
M - Total market logistics cost of proposed system
T – Total freight cost of proposed system
FW – Total fixed warehouse cost of proposed system
VW – Total Variable warehouse costs (including inventory)
S – Total cost of lost sales due to average delivery delay under proposed system
Market Logistics Decision
It should answer 4 questions
1. How should orders be handled? (Order processing)
2. Where should stocks be located? (Ware-housing)
3. How much stock should be held? (Inventory)
4. How should goods be shipped? (Transportation)
Order Remittance cycle –Time between an order’s receipt, delivery and payment
Stock level is called the order point

Piggyback – use of rails and trucks for transportation

Fishy back – Water and trucks
Train ship – Water and rail
Air truck – Air and truck