Chapter 16
Direct Marketing and
Marketing Resellers:
Retailers and
Wholesalers
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Objectives
1. Explain the wheel of retailing.
2. Explain how retailers select target markets.
3. Show how the elements of the marketing mix apply to
retailing strategy.
4. Explain the concepts of retail convergence and
scrambled merchandising.
5. Identify the functions performed by wholesaling
intermediaries.
6. Identify the major types of independent wholesaling
intermediaries and the situations appropriate for each.
7. Compare the basic types of direct marketing and
nonstore retailing.
8. Explain ways in which the Internet has altered the
wholesaling, retailing, and direct marketing
environments.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Retailing
 Describes the activities involved in selling
merchandise to ultimate consumers.
 Represent the distribution channel to most consumers
 Determine
– locations,
– store hours,
– quality and quantity of salespeople,
– store layouts,
– merchandise selections and
– return policies.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Wheel of Retailing
• Explains the patterns of change in retailing.
• A new type of retailer gains a competitive
foothold by offering customers lower prices.
• Maintains profits by reducing or eliminating
services.
• Once established the innovator adds more
services and prices gradually rise.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Wheel of Retailing
Low-end strategy
• Low prices
• Limited facilities and
services
• Price-sensitive
consumers
High-end strategy
• High prices
• Excellent facilities and
services
• Upscale consumers
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Medium strategy
• Moderate prices
• Improved facilities
• Broader base of valueand service-conscious
consumers
Retailing Strategy
Controllable variables
• Selecting a target market
• Developing a retailing mix
– Retailing mix specifies:
• Merchandise
strategy
• Customer service
standards
• Pricing guidelines
• Target market
analysis
• Promotion goals
• Location/distribution
decisions
• Store atmosphere
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Retailing
Strategy
Uncontrollable
variables
• Consumers
• Competition
• Technology
• Economic
conditions
• Seasonality
• Legal
restrictions
Markup
• The amount that a retailer adds to a product’s
cost to set the final selling price.
• The amount of the markup typically results
from:
1. The services performed by the retailer.
2. The inventory turnover rate.
• Typically state markups as percentages.
• Marketers determine markups based partly on
their judgments.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Location Decisions
Type of
merchandise
Financial
resources
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Target
market
Site
availability
Planned Shopping Center
• A group of retail stores designed,
coordinated, and marketed as a unit to
shoppers in a geographical trade area.
• Provide a single convenient location for
shoppers.
• Free parking.
• Facilitate shopping by maintaining uniform
hours of operation.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Four Main Types of Planned Shopping
Centers
1. Neighborhood Shopping Center
• Consists of a supermarket and group of smaller
stores.
• Provides convenient shopping for 5,000 to 50,000
shoppers who live within a few minutes’ commute.
• Contains 5 to 15 stores.
• Product mix is usually confined to convenient
goods and some shopping goods.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Four Main Types of Planned Shopping
Centers
2.Community Shopping Center
• Serves 20,000 to 100,000 people in a trade area
extending a few miles from its location.
• Contains anywhere from 10 to 30 retail stores.
• A Branch of a local department store or some other
large store as the primary tenant.
• Encompasses more stores featuring shopping goods.
• Some professional office.
• A branch bank.
• Maybe a movie theater or supermarket.
• Tenants often share some promotion costs.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Four Main Types of Planned Shopping
Centers
3. Regional Shopping Center
• At least 400,000 square feet of shopping
space.
• Emphasizes one or more major department
stores.
• Supplemented by as many as 200 smaller
stores.
• Needs a location within 30 minutes’ driving
time of at least 250,000 people.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
West Edmonton Mall
• Promoted as the world’s largest
mall.
• Over 800 stores.
• There are 110 eating
establishments.
• Seven world class attractions.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Four Main Types of Planned Shopping
Centers
4. Power Center
•
•
•
Located near a regional or superregional mall.
Brings together several huge specialty stores.
Rising in popularity during the 1990s.
5. Lifestyle Center
•
•
•
•
Offers a combination of shopping, entertainment
and restaurant.
At least 300,000 square feet.
Offer the intimacy and easy access of
neighborhood retailing with a fashionable cachet.
No big anchor stores.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Mall of America
Not just a mall but a destination.
– Has over 520 stores.
– Employs more than 12,000 people.
– Has between 35 and 42 million visitors per
year.
– Mall of America is one of the most visited
destinations in the United States, attracting
more visitors annually than Disney World,
Graceland and the Grand Canyon
combined.
Source: Mall of America web site
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Retailers by Form of Ownership
• Chain Stores
–
–
–
Chain stores are groups of retail outlets that
operate under central ownership and
management and handle the same product lines.
Major advantage: economies of scale.
May advertise in a variety of media.
• Independent Retailers
–
–
Account for about 43 percent of all retail sales.
Traditional advantage of independent stores is
friendly, personalized service.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Shopping by Store Type
• Convenience retailers focus their marketing
appeals on accessible locations, long store
hours, rapid checkout service, and adequate
parking facilities.
• Shopping stores include furniture stores,
appliance retailers, clothing outlets, and
sporting goods stores.
– Consumers usually compare prices.
• Specialty retailers combine carefully defined
product lines, services, and reputations.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Classification by Services
Consists of three retailer
types:
1. Self-service
2. Self-selection
3. Full-service retailers
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Self Service … Look For It Coming
To A Store Near You!
“SYDNEY, Australia -- NCR
Corp. will introduce its FastLane
self-checkout lanes to
consumers in Australia early
next year. Two Big W stores in
New South Wales will install
eight of the units.”
Source: KioskMarketplace.com
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Classification by Product Lines
1. Specialty store typically handles only part of a single
product.
• Stocks in considerable depth or variety.
• Typically carry convenience and shopping goods.
2. Limited-line retailers
• Customers find a large assortment of products
within one product line or a few related lines.
• Typically develops in areas with a large enough
population to sufficiently support it.
3. General Merchandise retailer
• Carry a wide variety of product lines that are all
stocked in some depth.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Convergence and Scrambled
Merchandising
• Retail convergence, whereby similar merchandise
is available from multiple retail outlets distinguished
by price more than any other factor.
• Scrambled merchandising - in which a retailer
combines dissimilar product lines in an attempt to
boost sales volume.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Independent Wholesaling
• Two categories:
– Merchant wholesalers
– Agents and brokers
• Two types of wholesalers:
– Full function merchant wholesalers
– Limited function merchant
wholesalers
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.