Chapter 14:
Retailing, Direct
Marketing, and
Wholesaling
Pride/Ferrell
Foundations of Marketing
Fourth Edition
Prepared by Milton Pressley
University of New Orleans
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Objectives
1. Understand the purpose and function of retailers in
the marketing channel.
2. Identify the major types of retailers.
3. Explore strategic issues in retailing.
4. Recognize the various forms of direct marketing
and selling.
5. Examine franchising and its benefits and
weaknesses.
6. Understand the nature and functions of wholesalers.
7. Understand how wholesalers are classified.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Retailing
• All transactions in which
the buyer intends to
consume the product
through personal, family
or household use
- Retailer: An
organization that
purchases products for
the purpose of reselling
them to ultimate
consumers
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Types of Retailers: General
Merchandise Retailers
General merchandise retailer – offers a variety of
product lines that are stocked in considerable depth
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Department Store
• Large retail
organizations
characterized by wide
product mixes and
organized into separate
departments to facilitate
marketing and internal
management
Department Store
Because of its size, wide
product mix, and services
provided, Macy’s is classified
as a department store.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Other Types of Retailers
• Discount store – Self-service, general merchandise,
brand name products at low prices
• Convenience store – Open long hours offering a
narrow assortment of convenience items
• Supermarket – A complete line of food products
with some nonfood items
• Superstore – Giant retail outlets carrying food and
nonfood products
• Hypermarket – Supermarket and discount store
combined into one location
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Discussion Question
• Click on the Television below and watch the
commercial. Then discuss which type of
retail store the ad represents.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Warehouse Clubs
• Large scale membersonly establishments that
combine features of
cash-and-carry
wholesaling with
discount
– Warehouse showrooms – Large
on-premise inventories with
minimal services (IKEA)
Warehouse Club
Sam’s Club is a warehouse club
that markets many product
lines. Most of Sam’s Club
product lines have limited
depth.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Specialty Retailers
Traditional
Specialty
Retailers
Specialty
Retailers
Off-Price
Retailers
Category
Killers
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Traditional Specialty Stores
• Stores that carry a
narrow product mix with
deep product lines
Traditional Specialty Store
Traditional specialty stores, like
Ann Taylor, have narrow but
deep product mixes.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Category Killers
• A very large specialty
store concentrating on a
major product category
and competing on the
basis of low prices and
product availability
Category Killer
Category killers have enormous
product mixes and low prices.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Off-Price Retailers
• Stores that purchase manufacturers’
seconds, overruns, and off-season
merchandise at below-wholesale prices
– Resale to consumers at deep discounts
– Examples: T.J. Maxx, Marshalls, and
Burlington Coat Factory
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Wheel of Retailing
• A hypothesis on the evolution and development of
new types of retail stores
• New retailers enter a market with low prices,
margins, and status.
– Low prices are from cost-cutting and attract
imitators
• Retailers eventually become more elaborate and
expensive over time
– Many discount stores (like Kohl’s) offer more
services and look like department stores
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Wheel of Retailing
High prices
and markups,
many
services,
expensive
surroundings
Department
stores
General
stores, misc.
small
retailers
Low prices
and markups,
few services,
austere
surroundings
Department
stores
Department
stores
Discount
stores
Factory
outlet malls
Discount
stores
Warehouse
clubs
Category
killers
Online retailers
Early 20th c.
Late 20th
c.
Early 21st c.
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Strategic Issues:
Location, Location, Location
• Various factors when evaluating potential
locations
- Location of the firm’s target market within the trading
area
- Kinds of products being sold
- Availability of public transportation
- Customer characteristics
- Competitors’ locations
• Types of locations
- Freestanding structures
- Business districts
- Planned shopping centers
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Types of Planned Shopping
Centers
• Neighborhood shopping centers
- Several small convenience and specialty stores
• Community shopping centers
- One or two department stores and some specialty stores
• Regional shopping centers
- Largest department store, widest product mixes and the
deepest product lines of all shopping centers
 Superregional shopping center – Wide, deep mix attracts customers
from many miles away
 Lifestyle shopping center – Upscale specialty shops and entertainment
 Power shopping center – Off-price stores with category killers
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Question
• Click on the Television below and watch the
commercial for Mall and Water Park of
America. Then discuss which type of
shopping center you think the Mall of
America most resembles.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Other Strategic Issues
– Retail positioning –
• Identifying an un-served or underserved market
segment and serving it through a strategy that
distinguishes the retailer from others in the minds of
consumers in that segment
– Store image –
• A functional and psychological picture in consumers’
mind
– Atmospherics –
• The physical elements in a store’s design that appeal to
consumers’ emotions and encourage buying
– Category management –
• Managing similar, often substitutable products
produced by different manufacturers
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Direct Marketing
• The use of telecommunications and nonpersonal
media to introduce products to consumers, who then
can purchase them via mail, telephone or the
Internet
- Catalog marketing – Customers select from catalogs
- Direct response marketing – Customers respond to ads
with mail or telephone orders
- Telemarketing – Products sold by phone
- Television home shopping – Customers order products
seen on TV by telephone
- Online retailing – Customers shop and buy online
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Online Retailing
• Retailing that makes
products available to
buyers through
online connections
Online Retailing
Travelocity is an online retailer
that offers a broad assortment
of travel services.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Direct Selling
• The marketing of products to ultimate
consumers through face-to-face sales
presentations at home or in the workplace
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Discussion Question
• Visit the Web Site by clicking on the @
symbol below. After exploring the Site,
discuss what type of direct marketing
Cabela’s is engaged in.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Franchising
• An arrangement in which a supplier
(franchiser) grants a dealer (franchisee) the
right to sell products in exchange for some
type of consideration
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Top U.S. Franchisers and Their
Startup Costs
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Wholesaling
• Transactions in which products are bought for
resale, for making other products or for general
business operations
- Services Provided by Wholesalers:
Initiating sales contacts
Providing financial assistance
Serving as conduits for information within the marketing channel
Assisting with marketing strategy
Helping retailers to select inventory
Offering specialized knowledge of market conditions
Offering expert negotiation on final purchases
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Types of Wholesalers
• Merchant wholesalers - Independently owned
businesses that take title to goods, assume ownership
risks and buy and sell products to other wholesalers,
business customers or retailers
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Types of Wholesalers
• Full-service wholesalers - Merchant
wholesalers that perform the widest range of
wholesaling functions
- General merchandise wholesalers – Carry many lines
with limited depth in each line
- General-line wholesalers – Carry many products from a
few lines
- Specialty-line wholesalers – Carry perhaps a single line
with few products
- Rack jobbers – Own and maintain display racks in stores
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Services That Limited Wholesalers
Provide
•
•
•
•
Cash-and-carry wholesalers –Customers pay cash and provide transportation
Truck wholesalers (truck jobbers) – Transport products direct to customers
Drop shippers (desk jobbers) – Take title but not possession
Mail-order wholesaling – Sell products through catalogs
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
• Agents
Agents and Brokers
- Intermediaries who represent either buyers or sellers on a permanent basis
• Brokers
- Intermediaries who bring buyers and sellers together temporarily
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Services That Agents and
Brokers Provide
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Agents and Brokers (cont’d)
• Manufacturers’ agents
- Independent intermediaries that represent two or more sellers
and offer complete product lines
• Selling agents
- Intermediaries that market a whole product line or a
manufacturer’s entire output
• Commission merchants
- Agents that receive goods on consignment and negotiate
sales in large, central markets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Manufacturers’ Sales Branches
and Offices
• Sales branch
- Manufacturer owned intermediaries that sell products
and provide support services to the manufacturer’s
sales force
• Sales offices
- Manufacturer owned operations that provide
services normally associated with agents
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
After Reviewing This Chapter
You Should:
1. Understand the purpose and function of
retailers in the marketing channel.
2. Know the major types of retailers.
3. Understand strategic issues in retailing.
4. Be able to recognize the various forms of
direct marketing and selling.
5. Understand franchising and its benefits and
weaknesses.
6. Understand the nature and functions of
wholesalers.
7. Know how wholesalers are classified.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Key Concepts
•
• Superregional shopping centers
• Lifestyle shopping centers
• Retailer
• Power shopping centers
• General-merchandise retailer
• Retail positioning
• Department stores
• Atmospherics
• Discount stores
• Category management
• Convenience store
• Direct marketing
• Supermarkets
• Catalog marketing
• Superstores
• Direct response marketing
• Hypermarkets
• Telemarketing
• Warehouse clubs
• Television home shopping
• Warehouse showrooms
• Online retailing
• Traditional specialty retailers
• Direct selling
• Category killer
• Franchising
• Wholesaling
• Off-price retailers
• Wholesaler
• Neighborhood shopping centers
• Merchant wholesalers
• Community shopping centers
• Full-service wholesalers
• Regional shopping center
• General merchandise wholesalers
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Retailing