Retailing and Wholesaling
Chapter 11
Supply
chain
Opening Case Study- Caterpillar
• For more than seven decades, Caterpillar
has dominated the world’s market for
heavy construction and mining
equipment.
• Caterpillar sells more than 300 products
in nearly 200 companies generating sales
more than $20 billion.
• Caterpillar captures 27% the worldwide
construction equipment business, more
than double that of No.2 Komatsu
• Its market share in US is more than twice
that of Komatsu and Deere combined.
• How is this happening???
10-3
Distribution in Action
FedEx’s creative
and imposing
distribution
system made it
a market leader
in express
delivery.
10-4
What Is Retailing?
• Retailing:
– includes all the activities involved in selling
products or services directly to final consumers for
their personal, non-business use.
• Most retailing is done by retailers, but
nonstore retailing has recently grown by leaps
and bounds.
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Types of Retailers
• Retailers are classified based on:
– Amount of service they offer
– Breadth and depth of product lines
– Relative prices charged
– How they are organized
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Self-Service Retailers
Serve customers
who are willing to
perform their own
“locate-compareselect” process to
save money.
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Limited-Service Retailers:
– Provide more sales assistance because they carry more
shopping goods about which customers need information
• Big C, Tesco Lotus etc
Full-Service Retailers:
Usually carry more specialty goods
for which customers like to be
“waited on.”
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11-8
Major Store Retailer Types
• Specialty stores
• Department stores
• Supermarkets
– Category Killers
•
•
•
•
Convenience stores
Discount stores
Off-price retailers
Superstores
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Specialty stores
• They carry narrow product lines with deep
assortments within those lines.
• The increasing use of good market
segmentation, market targeting and product
specialization has resulted in a greater need of
stores that focus on specific products and
segments.
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11-10
Specialty store
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11-11
Department stores
• A retail organization that carry
a wide variety of product
lines- typically clothing, home
furnishings, and house hold
goods; each line is operated as
a separate department
managed by specialist buyers
or merchandisers.
• Eg: Zen, Central stores, other shopping
malls
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Supermarkets
• These are the most frequently shopped type
of retail store.
• Supermarkets are the Large, low-cost, lowmargin, high-volume, self service stores that
carries a wide variety of food, laundry, and
household products.
• Thus most supermarkets are
making improvements in to
attract more customers.
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Convenience stores
These are small stores that
carry a limited line of highturnover convenience
goods.
These shops will be open
for long hours seven days a
week and will be located a
residential area.
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Superstores
• A store much larger than a regular
supermarket that carries a large assortment of
routinely purchased food products, non food
items and service.
• Wal-Mart, Kmart etc
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Category killers
• Giant specialty store that carries
a very deep assortment of a
particular line and is staffed by
knowledgeable employees.
• Category killers are prevalent in
a wide range of categories,
including books, baby gear, toys,
electronics, home improvement
products etc.
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Relative Prices Classification
• Discount stores
• Off-price retailers
– Independent off-price retailers
– Factory outlets
• Factory outlet malls
– Warehouse clubs
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Warehouse club
• A warehouse club is a retail store,
usually selling a wide variety of
merchandise, in which customers are
required to buy large, wholesale
quantities of the store's products,
which makes these clubs attractive to
both bargain hunters and small
business owners.
• In addition, customers may be
required to pay annual membership
fees in order to shop.
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The Future of Retailing
1.
2.
3.
4.
New Retail Forms and
Shortening Retail Life
Cycles
Growth of Non store
Retailing
Retail Convergence
Rise of the Mega
retailers
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5. Growing Importance
of Retail Technology
6. Global Expansion of
Major Retailers
7. Retail Stores as
“Communities” or
“Hangouts”
11-19
Shortening Retail Life Cycles
• New retail forms continue to emerge to meet new
situations and consumer needs, but the life cycle of
new retail forms is getting shorter.
• Of the top 10 discount retailers of US in 1962, not
even one exists today. This was the year today’s retail
giants “Wal-Mart and Kmart has begun operations as
a small retailer.
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Growth of Nonstore Retailing
• Online retailing is the newest
form of non store retailing.
• With easier to use web sites,
improved online service, and the
increasing sophistication of
search technologies, online
business is booming.
• All types of retailers now use
web as an important tool.
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Retail Convergence
• The merging of consumers, products,
prices and retailers is called retail
convergence.
• Retail convergence is the coming
together of shoppers, goods and
prices.
• Customers of all income levels are
shopping to the same stores, often
for the same products.
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Rise of the Mega retailers
• The rise of huge mass merchandisers and specialty superstores, the
formation of Vertical Marketing Systems and a rash of retail mergers have
created a core of superpower mega retailers.
• Through their superior information systems and buying power, these giant
retailers can offer better merchandise selections, good service, and strong
price savings to consumers.
• For example, in the US, Wal-Mart’s revenues are five times those of P&G
• Wal-Mart generates 20% of the P&G’s revenues. Hence Wal-Mart can and
often does use this power to wring concessions from P&G and other
suppliers.
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Wholesaling
• Wholesaling:
– includes all activities involved in selling goods and
services to those buying for resale or business use.
• Wholesalers add value for producers by
performing one or more channel functions.
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Functions Provided by Wholesalers
• Selling and
promoting
• Buying and
assortment building
• Bulk-breaking
• Warehousing
• Transportation
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•
•
•
•
11-27
Financing
Risk bearing
Market information
Management
services and advice