MKTG205 – RETAILING MANAGEMENT
CHAPTER NOTES
Chapter 1: Introduction to the World of Retailing
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Retailing: a set of business activities that adds value to the products and services sold to
consumers for their personal or family use
o Retailing involves sale of products as well as sale of services
o Not all retailing is done in stores also, sales can also be done over the Internet
such as e-commerce websites or video-sharing platforms (e.g., Netflix)
Retailer: a business that sells products and services to consumers for their personal or
family use
o Retailers attempt to satisfy consumer needs by having…
 The right merchandise
 At the right price
 At the right place
 In the right quantities
 At the right time
o Retailers also provide markets for producers to sell their merchandise
Distribution channel: a set of firms that facilitates the movement of products from the
point of production to the point of sale to the ultimate consumer
o Manufacturers typically make products and sell them to retailers or wholesalers
o Wholesalers engage in buying, taking title to, often storing, and physically
handling goods in large quantities, then reselling the goods (usually in smaller
quantities) to retailers or industrial or business users
 Wholesalers and retailers may perform many of the same functions, but
wholesalers uniquely satisfy retailers’ needs, whereas retailers direct their
efforts to satisfying the needs of ultimate consumers
 Some retail chains such as Loblaws, Costco, and Rona function as both
retailers and wholesalers
o In some distribution channels, the manufacturing, wholesaling, and retailing
activities are performed by independent firms, but most distribution channels
feature some vertical integration
o Vertical integration: An example of diversification by retailers involving
investments by retailers in wholesaling or manufacturing merchandise
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Backward integration: when a retailer performs some distribution and
manufacturing activities, such as operating warehouses or designing
private-label merchandise
 Forward integration: occurs when a manufacturer undertakes retailing
activities, such as Canada Goose operating its own retail stores
 Most retailers such as Walmart and Sport Chek engage in both
wholesaling and retailing activities
 They buy directly from manufacturers, have merchandise shipped
to their warehouses for storage, and then distribute the
merchandise to their stores
 Other retailers such as The Gap, Aritzia, Aldo are more vertically
integrated as they design the merchandise they sell and then contract with
manufacturers to produce it exclusively for them
Functions performed by retailers
o Providing assortments
 Offering an assortment enables customers to choose from a wide selection
of brands, designs, sizes, colours, and prices in one location
o Breaking bulk: a function performed by retailers or wholesalers in which they
receive large quantities of merchandise
 To reduce transportation costs, manufacturers and wholesalers typically
ship cases of frozen dinners or cartons of shirts to retailers
 Retailers then offer the products in smaller quantities tailored to the
individual consumer’s and households’ consumption patterns
 It is cost-effective for manufacturers to package and ship merchandise in
larger rather than smaller quantities; also easier for consumers to purchase
merchandise in the smaller, more manageable quantities they prefer
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