CHAPTER 11
Retailing and
Wholesaling
Roadmap: Previewing the Concepts
 Explain the roles of retailers and wholesalers in



the distribution channel.
Describe the major types of retailers and give
examples of each.
Identify the major types of wholesalers and give
examples of each.
Explain the marketing decisions facing retailers
and wholesalers.
Copyright 2007, Prentice-Hall Inc.
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WHOLE FOODS MARKET – Finding Its Niche
Whole Foods Market
 Has 170 stores


worldwide with $4 billion
in sales vs. 5000 stores
and sales of $285 billion
for Wal-Mart.
Offers organic, natural,
and gourmet foods.
Positions itself AWAY
from Wal-Mart:
“Whole Foods, Whole
People, Whole Planet.”
Copyright 2007, Prentice-Hall Inc.
Marketing Efforts
 Web site reinforces the



company’s positioning.
Caters to health conscious,
affluent, liberal, educated
consumer base.
Both in-store and online
shopping is a customer
experience.
Cares about employees,
customers, & community.
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What Is Retailing?
Retailing includes all the activities
involved in selling products or
services directly to final consumers
for their personal or business use.
Most retailing is done by retailers, but nonstore
retailing has recently grown substantially.
Copyright 2007, Prentice-Hall Inc.
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Classification of Types of Retailers
 Retailers are classified based on:
– Level of service they offer.
– Breadth and depth of product lines.
– Relative prices charged.
– How they are organized.
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Level of Service Classification
 Self-Service Retailers:
– Serve customers who are willing to perform their
own “locate-compare-select” process to save
money.
 Limited-Service Retailers:
– Provide more sales assistance because they
carry more shopping goods about which
customers need information.
 Full-Service Retailers:
– Usually carry more specialty goods for which
customers like to be “waited on.”
Copyright 2007, Prentice-Hall Inc.
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Product Line Classification


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Specialty stores
Department stores
Supermarkets
Convenience stores
 Superstores
– Category killers
– Supercenters
– Hypermarkets
Video Snippet
What type of retailers
carry the Reebok shoe
brand? Learn more by
watching this video
snippet.
Copyright 2007, Prentice-Hall Inc.
11-7
Product Line Classification
 Specialty stores
– Carry narrow product lines with deep
assortments within those lines.
 Department stores
– Carry a wide variety of product
lines – typically clothing, home
furnishings, and household goods.
Each product line is operated by
a separate department managed
by specialist buyers or
merchandisers.
Copyright 2007, Prentice-Hall Inc.
11-8
Marketing in Action
Specialty Stores
The Gap’s product
lines are limited to
clothing and
accessories for
men, women, kids,
and babies. In
addition to regular
sizes, petite and
tall sizes are
available in a
variety of clothing
items.
http://www.gap.com/browse/home.do
Copyright 2007, Prentice-Hall Inc.
11-9
Product Line Classification
 Supermarkets
– Large, low-cost, low-margin, high-volume,
self-service store that carries a wide
variety of food, laundry, and household
products.
 Convenience stores
– Small stores located near residential areas
that are open long hours 7 days a week
and carry a limited line of high-turnover
convenience goods.
Copyright 2007, Prentice-Hall Inc.
11-10
Superstores
 Larger than regular supermarkets and offer a

large assortment of routinely purchased
food products, nonfood items, and services.
Category Killers
– Giant specialty stores that carry a very deep
assortment of a particular line and are staffed by
knowledgeable employees.
 Supercenters
– Large combination discount and grocery stores.
 Hypermarkets
– Gigantic supercenters the size of 6 football fields.
Copyright 2007, Prentice-Hall Inc.
11-11
Let’s Talk!
Would you consider Lowe’s to be a
category killer? Why or why not?
Copyright 2007, Prentice-Hall Inc.
11-12
Relative Prices Classification
 Discount stores
 Off-price retailers
– Independent offprice retailers
– Factory outlets
 Factory outlet
malls
 Value-retail
centers
– Warehouse club
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11-13
Discount Stores
A retail institution that sells standard
merchandise at lower prices by
accepting lower margins and selling
at higher volume.
Wal-Mart is such a successful discounter that they
now sell more toys than category killer Toys ‘R Us.
Copyright 2007, Prentice-Hall Inc.
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Relative Prices Classification
 Off-price Retailers
– Independent Off-price Retailers:
 Either owned and run by entrepreneurs or as a
division of a larger retail operation.
– Factory Outlets:
 Owned and operated by a manufacturer.
Normally carries the manufacturer’s surplus,
discontinued, or irregular goods.
– Warehouse Club:
 Sells a limited selection of brand-name
grocery items, appliances, clothing, and a
hodgepodge of other goods at deep discounts
to members who pay annual membership fees.
Copyright 2007, Prentice-Hall Inc.
11-15
Marketing in Action
Factory Outlet Malls
Factory outlet malls and
value-retail centers have
blossomed in recent
years, making them one
of the hottest growth
areas in retailing.
Copyright 2007, Prentice-Hall Inc.
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Organizational Classification
 Corporate chain
stores
 Voluntary chain
 Retailer
cooperative
 Franchise
 Merchandising
conglomerates
Copyright 2007, Prentice-Hall Inc.
True Value is an example
of a voluntary chain.
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Organizational Classification
 Chain Stores
– Two or more outlets that are owned and
controlled, have central buying and
merchandising, and sell similar lines of
merchandise.
 Voluntary Chains
– A wholesaler-sponsored group of
independent retailers that engages in bulk
buying and common merchandising.
Copyright 2007, Prentice-Hall Inc.
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Organizational Classification
 Retailer Cooperatives
– A group of independent retailers that bands
together to set up a jointly owned, central
wholesale operation and conducts joint
merchandising and promotion efforts.
 Franchises
– Contractual association between a manufacturer,
wholesaler, or service organization (a franchiser)
and independent businesspeople (franchisees)
who buy the right to own and operate one or
more units in the franchise system.
Copyright 2007, Prentice-Hall Inc.
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Marketing in Action
Retailing Franchise Opportunities
Not all
franchise
opportunities
are in fast
food. In fact,
franchises
now account
for 40 percent
of all retail
sales in the
United
States.
Copyright 2007, Prentice-Hall Inc.
11-20
Organizational Classification
 Merchandising
Conglomerates
– Corporation that
combines several
diversified retailing
lines and forms
under central
ownership, as well
as some integration
of their distribution
and management
functions.
Copyright 2007, Prentice-Hall Inc.
Limited Brands operates six retail
brands. Visit the Web site for
details.
www.limitedbrands.com
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Figure 11-1
Retailer Marketing Decisions
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11-22
Marketing in Action
Amazon Targets Its Market
Online retailer
Amazon uses a
sophisticated
database to
track customer
purchases and
individually
target buyers
by suggesting
other items
that fit past
purchase
profiles.
Copyright 2007, Prentice-Hall Inc.
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Assortment and Service Decisions
 Product assortment
– Should differentiate the retailer while matching
target shoppers’ expectations.
 Services mix
– Another opportunity for differentiation.
 Store atmosphere
– Physical layout can help/hinder shopping.
– Experiential retailing helps sell goods.
– Unusual, exciting shopping environments are
becoming more common.
Copyright 2007, Prentice-Hall Inc.
11-24
Marketing in Action
Experiential
Retailing
Mall of America
pioneered the
experiential
retailing concept
and remains the
#1 retail tourist
attraction in the
nation.
www.mallofamerica.com
Copyright 2007, Prentice-Hall Inc.
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Price and Promotion Decisions
 Pricing:
– Must fit its target market and positioning, product
and service assortment, and competition.
 Promotion:
– Can use any or all of the promotion tools—
advertising, personal selling, sales promotion,
public relations, and direct marketing—to reach
consumers.
 Place:
– Retailers can locate in central business districts,
various types of shopping centers, strip malls, or
power centers.
– Location is the key to success.
Copyright 2007, Prentice-Hall Inc.
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Types of Shopping Centers
 Regional shopping
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center or mall
Community
shopping center
Neighborhood
shopping center
(strip mall)
Power center
Megamalls
Lifestyle centers
Copyright 2007, Prentice-Hall Inc.
Which form of shopping
center appears to be
represented by the photo?
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Marketing in Action
What’s Next for Mall of America?
Megamall superstar, the Mall of America, has begun
a billion dollar Phase II expansion that will include a
world class casino, concert and performing arts hall,
multi-cultural exhibits, indoor golf course, NHL-sized
ice rink, themed hotel rooms, and of course, highend retail stores.
Copyright 2007, Prentice-Hall Inc.
11-28
The Future of Retailing
1. New Retail Forms
and Shortening
Retail Life Cycles
2. Growth of
Nonstore Retailing
3. Retail
Convergence
4. Rise of the
Megaretailers
Copyright 2007, Prentice-Hall Inc.
5. Growing
Importance of
Retail Technology
6. Global Expansion
of Major Retailers
7. Retail Stores as
“Communities” or
“Hangouts”
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Let’s Talk!
Which retailing
trend may
contribute the
most to the
demise of
traditional
malls? Why?
What other factors have contributed to the
declining popularity of this retail form? Explain.
Copyright 2007, Prentice-Hall Inc.
11-30
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.
Copyright 2007, Prentice-Hall Inc.
11-31
Functions Provided by Wholesalers
 Selling and
promoting
 Buying and
assortment
building
 Bulk-breaking
 Warehousing
 Transportation
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 Financing
 Risk bearing
 Market
information
 Management
services and
advice
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Types of Wholesalers
 Merchant Wholesalers
– Largest group of wholesalers
– Account for 50 percent of wholesaling
– Two broad categories:
 Full-service wholesalers
 Limited-service wholesalers
Copyright 2007, Prentice-Hall Inc.
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Types of Wholesalers
 Brokers and Agents
– Do not take title to goods.
– Perform fewer functions.
– Brokers bring buyers and sellers together.
– Agents represent buyers on more
permanent basis.
– Manufacturers’ agents are most common
type of agent wholesaler.
Copyright 2007, Prentice-Hall Inc.
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Types of Wholesalers
 Manufacturers’ and Retailers’ Sales
Branches and Offices
– Wholesaling by sellers or buyers
themselves rather than through
independent wholesalers.
 Sales branches carry inventory.
 Sales offices do not.
 Many retailers set up purchasing
centers in major market areas.
Copyright 2007, Prentice-Hall Inc.
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Marketing in Action
Wholesalers
Grainger, the leading
wholesaler of
maintenance, repair,
and operating (MRO)
supplies, succeeds by
making life easier for
the entire marketing
channel.
Copyright 2007, Prentice-Hall Inc.
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Figure 11-2
Wholesaler Marketing Decisions
Copyright 2007, Prentice-Hall Inc.
11-37
Trends in Wholesaling
 Fierce resistance to price increases.
 Winnowing out of suppliers who are
not adding value based on cost and
quality.
 Distinction between large retailers and
wholesalers is blurry.
 Will continue to increase the services
provided to retailers.
 Wholesalers are now going global.
Copyright 2007, Prentice-Hall Inc.
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Rest Area: Reviewing the Concepts
 Explain the roles of retailers and wholesalers



in the distribution channel.
Describe the major types of retailers and give
examples of each.
Identify the major types of wholesalers and
give examples of each.
Explain the marketing decisions facing retailers
and wholesalers.
Copyright 2007, Prentice-Hall Inc.
11-39