chapter fourteen wholesaling, retailing, and physical distribution

Chapter Fourteen

Wholesaling, Retailing, and Physical Distribution

Copyright © Cengage Learning. All rights reserved.

Learning Objectives

1. Identify the various channels of distribution that are used for consumer and industrial products.

2. Explain the concept of market coverage.3. Understand how supply-chain management

facilitates partnering among channel members.4. Describe what a vertical marketing system is

and identify the types of vertical marketing systems.

5. Discuss the need for wholesalers and describe the services they provide to retailers and manufacturers.

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Learning Objectives (cont’d)

6. Identify and describe the major types of wholesalers.

7. Distinguish among the major types of retailers.

8. Identify the categories of shopping centers and the factors that determine how shopping centers are classified.

9. Explain the five most important physical distribution activities.

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Chapter 14 Outline

– Channels of Distribution• Channels for Consumer Products• Channels for Business Products• Market Coverage• Partnering Through Supply-Chain Management• Vertical Marketing Systems

– Marketing Intermediaries: Wholesalers• Justifications for Marketing Intermediaries• Wholesalers’ Services to Retailers• Wholesalers’ Services to Manufacturers• Types of Wholesalers

Copyright © Cengage Learning. All rights reserved. 14 | 4

Chapter 14 Outline (cont’d)

– Marketing Intermediaries: Retailers• Classes of In-Store Retailers• Kinds of Nonstore Retailing

– Planned Shopping Centers• Lifestyle Shopping Centers• Neighborhood Shopping Centers• Community Shopping Centers• Regional Shopping Centers


Chapter 14 Outline (cont’d)

– Physical Distribution• Inventory Management• Order Processing• Warehousing• Materials Handling• Transportation



Channels of Distribution

• Channel of distribution (marketing channel)

• Middleman (marketing intermediary)

– A marketing organization that links a producer and user within a marketing channel

• Merchant middleman • Functional middleman • Retailer• Wholesaler

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Channels for Consumer Products

• Producer to consumer (direct channel)– No intermediaries

– Used by all services and by a few consumer goods

– Producers can control quality and price, do not have to pay for intermediaries, and can be close to their customers

– Examples: Dell Computer, Mary Kay Cosmetics

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Channels for Consumer Products (cont’d)

• Producer to retailer to consumer– Producers sell directly to retailers when

retailers (Wal-Mart) can buy in large quantities

– Most often used for bulky products for which additional handling would increase selling costs, and for perishable or high-fashion products that must reach consumers quickly

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• Producer to wholesaler to retailer to consumer– The traditional channel

– Used when a producer’s products are carried by so many retailers that the producer cannot deal with them all

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• Producer to agent to wholesaler to retailer to consumer– Agent

– Often used for inexpensive, frequently purchased items, for seasonal products, and by producers that do not have their own sales forces

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• A manufacturer may use multiple channels– To reach different market segments

– To increase sales or capture a larger market share



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Channels for Business Products

• Producer to business user– Usually used for heavy machinery, airplanes,

major equipment

– Allows the producer to provide expert and timely services to customers

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Channels for Business Products (cont’d)

• Producer to agent middleman to business user– Usually used for operating supplies, accessory

equipment, small tools, standardized parts

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Market Coverage

• Intensity of market coverage– Intensive distribution

– Selective distribution

– Exclusive distribution

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Partnering Through Supply Chain Management

• Supply chain management– Long-term partnership among channel members

– Category management

– Technology

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Vertical Marketing Systems

• Vertical channel integration– The combining of two or more stages of a

distribution channel under a single firm’s management

• Vertical marketing system (VMS)– A centrally managed distribution channel

resulting from vertical channel integration– Administered

– Contractual

– Corporate

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Marketing Intermediaries: Wholesalers

• Justifications for marketing intermediaries– Intermediaries perform essential marketing

services

– Manufacturers would be burdened with additional record keeping and maintaining contact with numerous retailers

– Costs for distribution would not decrease and could possibly increase due to the marketing inefficiencies of producers

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Wholesalers’ Services to Retailers

• Buy in large quantities and then sell in smaller quantities

• Deliver goods• Stock in one place a variety of goods• Promote products to retailers• Provide market information for both producers

and retailers• Provide financial aid in the form of inventory

management, loans, delayed billing

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Wholesalers’ Services to Manufacturers

• Provide instant sales forces to manufacturers• Reduce manufacturers’ inventory costs by

purchasing finished goods in sizable quantities

• Assume the credit risks associated with selling to retailers

• Furnish market information gleaned from the market and customers to the manufacturers

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Types of Wholesalers

• Merchant wholesalers– Operate in one or more warehouses where they

receive, take title to, and store goods

– These wholesalers are sometimes called distributors or jobbers

– Full-service wholesalers• General merchandise wholesaler• Limited-line wholesaler• Specialty-line wholesaler

– Limited-service wholesalers

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Types of Wholesalers (cont’d)

• Commission merchants, agents, and brokers– Functional middlemen that do not take title to

products

– Perform some marketing activities

– Paid a commission (percentage of sales price)

– Commission merchant

– Agent

– Broker

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Types of Wholesalers (cont’d)

• Manufacturer’s sales branch– Merchant wholesaler owned by a

manufacturer– Carries inventory, extends credit, delivers

goods, helps in promoting products– Customers are retailers, other wholesalers,

and industrial purchasers• Manufacturer’s sales office

– Sales agent owned by a manufacturer– Sells goods manufactured by its own firm and

also others that complement its own product line

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Marketing Intermediaries: Retailers

• Retailers: The final link between producers and consumers

• Approx. 2.6 million retail firms in the U.S.• 90% have sales of less than $1 million

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Classes of In-Store Retailers

• Independent retailer

• Chain retailer

• Department store

• Discount store

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Classes of In-Store Retailers (cont’d)

• Catalog showroom

• Warehouse showroom

• Convenience store

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• Supermarket

• Superstore

• Warehouse club

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• Traditional specialty store

• Off-price retailer

• Category killer

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Kinds of Nonstore Retailing

• A type of retailing whereby consumers purchase products without visiting a store

• Direct selling

• Direct marketing

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Kinds of Nonstore Retailing (cont’d)

• Catalog marketing

• Direct-response marketing

• Telemarketing

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Kinds of Nonstore Retailing (cont’d)

• Television home shopping

• Online retailing

• Automatic vending

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Planned Shopping Centers

• A self-contained retail facility constructed by independent owners and consisting of various stores– Lifestyle shopping center

– Neighborhood shopping center

– Community shopping center

– Regional shopping center

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Physical Distribution

• All those activities concerned with the efficient movement of products from the producer to the ultimate user

• Inventory management– The process of managing inventories in such a way as

to minimize inventory costs, including both holding costs and potential stock-out costs

• Holding costs • Stock-out

• Order processing– Activities involved in receiving and filling customers’

purchase orders

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Physical Distribution

• Warehousing– The set of activities involved in receiving and storing

goods and preparing them for reshipment• Receiving goods• Identifying goods• Sorting goods• Dispatching goods to storage• Holding goods• Recalling, picking, and assembling goods• Dispatching shipments

– Types of warehouses• Private warehouses• Public warehouses

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Physical Distribution (cont’d)

• Materials handling

• Transportation– The shipment of products to customers

– Carrier• Common carriers • Contract • Private carriers

– Freight forwarders

– Railroads

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chapter fourteen wholesaling, retailing, and physical distribution

Documents

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learning objectivesidentify

consumer productschannels

consumer productsproducer

consumer goodsproducers

categories of shopping

major types of retailers

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