wholesaling, retailing, and physical distribution-prince dudhatra-9724949948

8/7/2019 Wholesaling, Retailing, And Physical Distribution-Prince Dudhatra-9724949948

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Chapter

Fifteen

Wholesaling,

Retailing, and

Physical Distribution


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prince dudhatra-9724949948

Learning Objectives

1. Identify the various channels of distributionthat are used for consumer and industrialproducts.

2. Explain the concept of market coverage.

3. Understand how supply-chain managementfacilitates partnering among channel members.

4. Describe what a vertical marketing system isand identify the types of vertical marketing

systems.5. Discuss the need for wholesalers and describe

the services they provide to retailers andmanufacturers.


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Learning Objectives (contd)

6. Identify and describe the major types ofwholesalers.

7. Distinguish among the major types of

retailers.8. Identify the categories of shopping centers

and the factors that determine how shoppingcenters are classified.

9. Explain the five most important physicaldistribution activities.


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Channels of Distribution

Channel of distribution (marketing channel)

A sequence of marketing organizations that directs aproduct from the producer to the ultimate user

Middleman (marketing intermediary)

A marketing organization that links a producer anduser within a marketing channel

Merchant middlemantakes title to products by buyingthem

Functional middlemanhelps in the transfer ofownership of products but does not take title to the

products Retailerbuys from producers or other middlemen and

sells to consumers

Wholesalersells products to other firms


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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 nothave to pay for intermediaries, and can beclose to their customers

Examples: Dell Computer, Mary KayCosmetics


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Channels for Consumer Products (contd)

Producer to retailer to consumer

Producers sell directly to retailers whenretailers (Wal-Mart) can buy in large quantities

M

ost often used for bulky products for whichadditional handling would increase sellingcosts, and for perishable or high-fashionproducts that must reach consumers quickly


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Producer to wholesaler to retailer toconsumer

The traditional channel

Used when a producers products are carriedby so many retailers that the producer cannotdeal with them all


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Producer to agent to wholesaler to retailer toconsumer

Agentfunctional middlemen that do not taketitle to products and are compensated bycommissions paid to the producers

Often used for inexpensive, frequently-purchased items, for seasonal products, andby producers that do not have their own salesforces


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A manufacturer may use multiple channels

To reach different market segments

When the same product is sold to consumers andbusinesses

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 andtimely services to customers


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Channels for Business Products (contd)

Producer to agent middleman to businessuser

Usually used for operating supplies, accessoryequipment, small tools, standardized parts


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Market Coverage

Intensity of market coverage Intensive distribution

The use of all availableoutlets for a product to

saturate the market Selective distribution

The use of only a portion ofthe available outlets for aproduct in each geographic

area Exclusive distribution

The use of only a single retailoutlet for a product in a larger

geographic area


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Partnering Through Supply

Chain Management

Supply chain management

Long-term partnership among channelmembers working together to create adistribution system that reduces

inefficiencies, costs, and redundancieswhile creating a competitive advantage andsatisfying customers

Category management

The retailer asks a supplier how to stock the

shelves Technology

Has enhanced implementation of supplychain management


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Vertical Marketing Systems

Vertical channel integration The combining of two or more stages of a distribution

channel under a single firms management

Vertical marketing system (VMS)

A centrally managed distribution channel resulting fromvertical channel integration

Administered

One channel member dominates the others

Contractual

Intermediary cooperation, rights, and obligations areformalized in contracts

Corporate

The entire channel is owned by the producer


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Marketing Intermediaries: Wholesalers

Justifications for marketingintermediaries

Intermediaries perform essentialmarketing services

Manufacturers would beburdened with additional recordkeeping and maintaining contactwith numerous retailers

Costs for distribution would notdecrease, and could possiblyincrease due to the marketinginefficiencies of producers


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Efficiency Provided by an Intermediary

Source: William M. Pride and O. C. Ferrell, Marketing: Concepts and Strategies, 12th ed. Copyright 2003 by Houghton Mifflin Company,Adapted with permission.


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Wholesalers Services to Retailers

Buy in large quantities andthen sell in smaller quantities

Deliver goods

Stock in one place a variety of

goods Promote products to retailers

Provide market information for bothproducers and retailers

Provide financial aid in the form ofinventory management, loans,delayed billing


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Wholesalers Services to Manufacturers

Provide instant sales forces to manufacturers

Reduce manufacturers inventory costs bypurchasing 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 Middlemen that purchase goods in large quantities and

then sell them to other wholesalers or retailers and toinstitutional, farm, government, professional, orindustrial users

Operate in one or more warehouses where theyreceive, take title to, and store goods

Full-service wholesalers

General merchandise wholesaler

Limited-line wholesaler Specialty-line wholesaler

Limited-service wholesalers


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Types of Wholesalers (contd)

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 Carries merchandise and negotiates sales for

manufacturers

Agent

Expedites exchanges, represents a buyer or a seller, andis often hired permanently on a commission basis

Broker

Specializes in a particular commodity, represents a buyeror a seller, and is likely to be hired on a temporary basis


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Types of Wholesalers (contd)

Manufacturers 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

Manufacturers sales office

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

also others that complement its own productline


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Marketing Intermediaries: Retailers

Retailers: The final linkbetween producers andconsumers

Approx 2.6 millionretail firms in the U.S.

90% have sales ofless than $1 million


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The Ten Largest Retail Firms

in the United States


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Classes of In-Store Retailers

Independent retailer A firm that operates only one retail outlet Chain retailer

A company that operates more than one retail outlet Department store

A retail store that (1) employs 25 or more persons and (2) sells at

least home furnishing, appliances, family apparel, and householdlinens and dry goods, each in a different part of the store Discount store

A self-service, general merchandise outlet that sells products atlower-than-usual prices


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Classes of In-Store

Retailers (contd)

Catalog showroom A retail outlet that displays well-known brands

and sells them at discount prices throughcatalogs within the store

Warehouse showroom A retail facility in a large, low-cost building with

large on-premises inventories and minimalservice

Convenience store A small food store that sells a limited variety of

products but remains open well beyondnormal business hours


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Classes of In-Store

Retailers (contd)

Supermarket A large self-service store that

sells primarily food and householdproducts

Superstore A large retail store that carries not

only food and nonfood productsordinarily found in supermarketsbut also additional product lines

Warehouse club A large-scale, members-only

establishment that combinesfeatures of cash-and-carrywholesaling with discount retailing


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Classes of In-Store

Retailers (contd)

Traditional specialty store A store that carries a narrow product mix with

deep product lines

Off-price retailer

A store that buys manufacturers seconds,overruns, returns, and off-seasonmerchandise for resale to consumers at deepdiscounts

Category killer A very large specialty store that concentrates

on a single productline and competes on the basis of low pricesand product availability


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Kinds of Nonstore Retailing

A type of retailing wherebyconsumers purchase productswithout visiting a store

Direct selling

The marketing of products toultimate consumers through face-to-face sales presentations at homeor in the workplace

Direct marketing Using computers, telephones, and

nonpersonal media to showproducts to customers, who canthen purchase them by mail,

telephone, or online


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Kinds of Nonstore Retailing (contd)

Catalog marketing An organization provides a

catalog from which customersmake selections and place

orders by mail or telephone Direct-response marketing

A retailer advertises a productand makes it availablethrough mail or telephoneorders

Telemarketing The performance of

marketing-related activities by

telephone


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Kinds of Nonstore Retailing (contd)

Television home shopping Products are displayed to television viewers,

who can then order the products by calling atoll-free number and paying by credit card

Online retailing

Presenting and selling products throughcomputer connections

Automatic vending The use of machines to dispense products


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Planned Shopping Centers

A self-contained retail facility constructed byindependent owners and consisting of various stores Lifestyle shopping center

Has an open-air configuration and is occupied byupscale national chain specialty stores

Neighborhood shopping center Comprises several small convenience and specialty

stores

Community shopping center Includes one or two department stores and some

specialty stores, along with convenience stores Regional shopping center

Contains large department stores, numerous specialtystores, restaurants, movie theaters, and sometimeshotels


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All those activities concerned with the efficientmovement of products from the producer to theultimate user

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

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

Holding coststhe costs of storing products until theyare purchased or shipped to customers

Stock-out coststhe costs of sales lost when items are

not in inventory when needed Order processing

Activities involved in receiving and filling customerspurchase orders


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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 warehousesowned and operated by a firm

Public warehousesoffer their services to all firms


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Physical Distribution (contd)

Materials handling The physical handling of goods, in warehousing as well

as during transportation

Transportation The shipment of products to customers

Carriera firm that offers transportation services Common carriersservices are available for hire to all

shippers

Contract carriersavailable for hire by one or severalshippers; not available to the general public

Private carriersowned and operated by the shipper Freight forwardersagents who facilitate the

transportation process for shippers by handling thedetails of the process


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Ratings of Transportation Modes


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Changes in Ton-Miles for Various

Transportation Modes

Source: U.S. Bureau of Transportation Statistics, NationalTransportation Statistics 2005, www.bts.gov ; accessed January 30, 2006

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