Managing

Retailing Wholesaling and Logistics

What marketing decisions do these marketing

intermediaries make ?

SHUBHAM VERMA ,

IIT GUWAHATI

Marketing Decisions

Retail Marketing Decisions

TARGET MARKET

Until a target market is not defines ,

consistent decisions cannot be made about

product assortment , décor and

advertisements .and service levels .

Fashion and You , the online retail portal has

found success by offering brands at

discounted prices to its customers

Channels

Fabindia reaches individuals

and institutional buyers with its

unique ethnic offerings through

multiple channels.Some of

which includes Internet , stores

and catalogs

Product Assortment

Product assortment is done on

basis of

1)Length

2)Breadth

(a)Narrow and shallow assortment

– Small lunch counters

(b)Narrow and deep assortment-

Delicatessen

(C)Broad and shallow assortment

– Cafeteria

(d) Broad and deep assortment -

Restaurant

(a) (c)

(b)

(d)

Some possibilities of product assortment :

• Feature Exclusive national brands that are not available

at competing retailers – Wills Lifestyle has added Wills

Luxuria , an expensive men’s wear range .

• Feature mostly private labelled merchandise – Benetton

and GAP mostly carry privately labelled clothing in their

stores.

• Feature surprise or ever changing merchandise – Men’s

Wearhouse offers a surprise assortment of export surplus

at heavy discounts .

Feature blockbuster

distinctive merchandise

events

Bloomingdale’s ran a month

– long celebration for the

Barbie doll’s 50th

anniversary

Feature the latest or

newest merchandise

first

ZARA excels in and

profits from being

first to market with

appealing new looks

Offer merchandising

customising services

Harrods of London makes

custom – tailored suits shirts

and ties for customers in

addition to readymade clothes

Procurement

• Use of computers to track inventory , compute economic order

quantities , order goods and analyse money spent on vendors and

products.

• Use of Radio frequency Identification ( RFID ) to monitor inventory and

track goods in real time .

• Use of Direct product profitability ( DPP ) to measure a product’s

handling costs from the time it reaches the warehouse until a

customer buys it in the retail store.

PRICESAll retailers want

HIGH (turns X earns)

But both do not go together

Most of then fall into :

(1) high markup – lower volume

(2) low markup – higher volume

Walmart has abandoned

“sales pricing” in favour of

Everyday Low Pricing (EDLP)

.

EDLP leads to :

• Lower advertising costs

• Greater pricing stability

• Stronger image of fairness

• Higher retail profits

SERVICES

Store atmosphere

Different essence in every department of store makes your store stand - out

Store Activities and experiences

There has started a fight between Internet and Store shopping.

Stores can use this fact as a plus point .

Customers can first experience the product and then buy which is not possible in online shopping.

Panasonic and Sony create a Home like environment at their stores to let their customers experience

their home theatre

Communications

• Ads in magazines like Vogue ,

Vanity Fair etc

• Discount coupons

• Membership cards

• Special sales on holidays

LOCATION

Stores at Central business districts

Stores at Regional Shopping Centres

(1)

(2)

(3) (1)Shopping Strips

(2)Store inside a large store

(3)Stand alone stores

Logistics Decisions

How should

we handle

orders ?

ORDER PROCESSING

Lower cycle time between Higher customer satisfaction Higher profit

Order and payment

Where would

we locate our

stocks ?

WAREHOUSING

(1)

(2)

(1)Consumer packaged goods companies (2) Medical Distributors

Decrease in Warehousing

10 to 15 percent

5 to 7 percent

90 percent

45 percent

More stocking

Faster Delivery

But , Higher Cost

To reduce costs :

• Centralize the inventory

• Use faster transport

• Assembly, packaging , and

constructing promotional display in

the plants itself

How much

stock shoud

we hold ?

INVENTORY

• INVENTORY COST: cost related to storing, maintaining its inventory over a period of time.

Increases at an accelerating rate.

• ORDER POINT: inventory draws down(at what level to place a new order).

-Should maintain the balance.

-Balance the risks(stock-out against the cost of overstock)

(1) Order processing cost- stable setup costs, running costs(of items).

a. Low setup cost- stable average cost

b. High setup cost- reduce the average cost.

• Larger the quantity ordered, less frequently an order needs to be placed.

INVENTORY

•ORDER-PROCESSING COST, compared with INVENTORY CARRING COSTS.

• Order processing cost and inventory: carrying costs sum up at different

order levels graph.

Inventory-carrying

cost per unit

Order-processing

cost per unit

Order Quantity

Q”

Cost

per

Uni

t(rup

ees)

Total cost per unit

•POSITIONING OF INVENTORY ITEMS- according to risk and opportunity.

-bottleneck items(high risk, low opportunity)

-critical items(high risk, high opportunity)

-Commodities items(low risk, high opportunity)

-Nuisance items(low risk, low opportunity)

• NEAR ZERO INVENTORY STRATEGY- build for order, not for stock also

known as SOMO, “sell one, make one.”

How should we

ship goods ?

TRANSPORTATION

Criteria to keep in mind

while for shipping :

• Speed

• Frequency

• Dependability

• Capability

• Availability

• Traceability

• Cost

Containerization

consists of putting

goods in boxes or

trailers that are

easy to carry

between two

transport modes.

Piggyback

Airtruck

Fishyback

Trainship

To reduce cost :

• some firms are putting items into shelf-ready packaging so they don’t need to unpack from a box.

To reduce damage :

• the size , weight , and fragility of the item must be reflected in creating

"These slides were created by Shubham Verma( IIT Guwahati ) as part of an internship done under the guidance of Prof. Sameer Mathur(www.IIMInternship.com)"