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Marketing Management

Chapter-16

Managing Retailing, Wholesaling,

and Logistics

Part :

Place

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MARKETING MANAGEMENT12th edition

16 Managing Retailing,

Wholesaling, and Logistics

Kotler Keller

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Chapter Questions

What major types of marketing intermediaries occupy this sector?

What marketing decisions do these marketing intermediaries make?

What are the major trends with marketing intermediaries?

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Retailing

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Retailing

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

A Retailer or Retail Store is any business enterprise whose sales volume comes primarily from retailing.

Note : Any organization selling to final customers-whether it is a manufacturer, wholesaler, or retailer-is doing retailing.

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Types of Retailers

CatalogueShowroom

Superstore

Off-PriceRetailer

Discount Store

DepartmentStore

Specialty Store

ConvenienceStore

Types of

Retailers

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Types of Retailers

There are seven different types of Retailers.

i. Convenience Store (Small store in residential area, often open 24/7, normally offers convenience goods; example : 7-Eleven)

ii. Specialty Store (Narrow Product Line; example : The Body Shop)

iii. Department Store (Several Product Lines; examples : Sears, Nordstrom, JC Penney)

iv. Discount Store (Standard or specialty merchandise; low price, low margin, high-volume stores; example : Wal-Mart)

v. Off-Price Retailer (Left-over goods, overruns, irregular merchandise sold at less than retail; example : Factory Outlets)

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Types of Retailers

vi. Superstore (Huge selling space, food and household items, plus services; examples : Category Killers (deep assortment in one category, like Home Depot), Hypermarket (huge stores that combine supermarket, discount and warehouse retailing; like Carrefour)

vii. Catalogue Showroom (Broad selection of brand-name goods sold by catalogue at discount)

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Types of Retailers

7 Eleven-USA A Convenience Store

The Body Shop-UK Cosmetic Chain-Specialty Store

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Types of Retailers

Nordstrom-USA An upscale Department Store

JC-Penney-USA A mid-range Department Store

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Types of Retailers

Carrefour-France A Hypermarket

Home Depot-USA A Category Killer

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Non-store Retailing

AutomaticVending

DirectMarketing

DirectSelling

Non-store Retailing

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Non-store Retailing

Although 97 percent of and services are sold through stores, however Non-store Retailing has been growing much faster than store retailing.

Non-store retailing falls into three major categories.

1. Direct Selling2. Direct Marketing3. Automatic Vending

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Non-store Retailing-Types

1. Direct Selling (It is the personal contact between a sales person and a consumer away from a retail store; like door-to-door selling)

2. Direct Marketing (Direct-Mail, Catalogue Marketing, Telemarketing, Television Direct-Response Marketing, E-Shopping)

3. Automatic Vending (It is the sale of products through a machine with no personal contact between buyer and seller. It is used for variety of merchandise, like for soft-drinks, dandy, newspapers etc.)

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Non-store Retailing

Vending MachinesA Non-store Retailing

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Wheel-of-Retailing Concept

The Wheel-of-Retailing hypothesis explains one reason that new store types emerge.

According to this concept, the conventional retail stores typically increase their services and raise their prices to cover the costs. These higher costs provide an opportunity for new store forms to offer lower prices and less service.

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Trends in Retailingi. New Retail Forms and Combinations (Some

supermarkets now include bank branches, bookstores, coffee shops, gas stations, and fitness clubs to their stores)

ii. Growth of Intertype Competition (Different types of stores-discount stores, catalogue showrooms, department stores-all compete for the same consumers by carrying the same type of merchandise)

iii. Competition Between Store-based and Nonstore-based Retailing

iv. Growth of Giant Retailers

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Trends in Retailing

v. Decline of Middle Market Retailers

vi. Growing Investment in Technology (Like check-out scanning systems, EDI, in-store television, store traffic radar systems etc.)

vii. Global Presence of Major Retailers

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Trends in Retailing

In-Store TelevisionCheck-Out Scanner at

a grocery store

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Private Labels vs National Brands

Private Label Brand : It is the one developed by the middle-men, like wholesaler or retailer etc. (e.g. Gourmet Milk, Gourmet Ice-cream etc.)

National Brand or Manufacturer’s Brand : It is the one developed by the manufacturer of a product (e.g. Pepsi, Coke etc.)

Generics : These are unbranded, plainly packaged, less expensive versions of common household products.

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The Private Label Threat

In the confrontation between manufacturers’ and private label brands, the retailers have many advantages.

Because shelf-space is scarce, many supermarkets now charge a ‘Slotting Fee’ for accepting a new national brand.

Retailers also charge for special display space and in-store advertising space.

Retailers typically give more prominent display to their own brands and make sure they are well-stocked.

The consumers have become more price sensitive, therefore they are attracted towards relatively cheaper private labels.

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The Private Label Threat

The retailers ask for slotting fee for allocating their scarce shelf-space to

National Brand manufacturers

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Wholesaling

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Wholesaling

Wholesaling includes all the activities involved in selling goods or services directly to those who buy for resale or business use.

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Difference between Wholesalers and Retailers

Wholesalers differ from retailers in a number of ways.

1. Wholesalers pay less attention to promotion, atmosphere, and location because they deal with business customers rather than final consumers.

2. Wholesale transactions are usually larger than retail transactions.

3. Wholesalers cover a larger trade area than retailers.

4. The government deals with wholesalers and retailers differently in-terms of legal regulations and taxes.

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Types of Wholesalers

SpecializedWholesalers

Manufacturers’and Retailers’

Branches and Offices

Brokersand

Agents

Limited-Service Wholesalers

Full-Service Wholesalers

MerchantWholesalers

Types of

Wholesalers

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Types of Wholesalers

1. Merchant Wholesalers (Independently owned, take title to the merchandise they handle. They can provide full service or limited service)

2. Full-Service Wholesalers (Provide full service like maintain sales force, offer credit, make deliveries etc.)

3. Limited-Service Wholesalers (Provide limited service, like cash and carry wholesalers sell FMCGs to small retailers for cash)

4. Brokers and Agents (Do not take title of goods. They facilitate buying and selling on commission basis)

5. Manufacturers’ and Retailers’ Branches and Offices (Wholesaling operations conducted by sellers (manufacturers) or buyers (retailers) themselves rather than through independent wholesalers)

6. Specialized Wholesalers (Auction Companies, Agricultural Assemblers (they buy agricultural output of many farms))

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Market Logistics

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Market Logistics

Physical Distribution : Physical Distribution starts at the factory, in which managers choose a set of warehouses and transportation carriers that will deliver the goods to final destinations in the desired time or at the lowest total cost.

Supply Chain Management (SCM) : Physical Distribution has now been expanded into the broader concept of Supply Chain Management (SCM). SCW starts before Physical Distribution, it includes procuring right inputs from suppliers (inbound logistics), production processes (operations), then dispatching to the final destination to end consumers (outbound logistics). (See Next Slide)

The supply chain perspective can help a company identify superior suppliers and distributors and help them improve productivity, which ultimately brings down the company’s cost.

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Inbound and Outbound Logistics

Inbound Logistics, referred to as physical supply, deals with the logistical relationship between the firm and its suppliers. It addresses the flow of materials from suppliers to the plant.

Outbound Logistics, referred to as physical distribution, is the logistical relationship between the firm and its customers. It is the movement of finished goods out of the plant to the final customer.

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Activity