© 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.
Chapter 14:Retailing, Direct Marketing, and Wholesaling
Pride/FerrellFoundations of MarketingFourth Edition
Prepared by Milton PressleyUniversity 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.
Objectives1. 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
© 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 Retailers: General
General merchandise retailer – offers a variety of product lines that are stocked in considerable 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.
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
© 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. 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 members-
only 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
Off-PriceRetailers
CategoryKillers
TraditionalSpecialtyRetailers
SpecialtyRetailers
© 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.
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
Department stores
Category killers
Warehouse clubs
Factory outlet malls
Discount stores
Department stores
Discount stores
Department stores
General stores, misc. small retailers
Late 20th c.
Early 20th c. Early 21st c.
Low prices and markups, few services, austere surroundings
High prices and markups, many services, expensive surroundings
Online 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.
Strategic Issues: • 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
© 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 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 centersSuperregional shopping center – Wide, deep mix attracts customers
from many miles awayLifestyle shopping center – Upscale specialty shops and entertainmentPower 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
© 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.
• 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.
Discussion Question
@
© 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
© 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.
Wholesaling• Transactions in which products are bought for
resale, for making other products or for general business operations
- Services Provided by Wholesalers: Initiating sales contactsProviding financial assistanceServing as conduits for information within the marketing channelAssisting with marketing strategyHelping retailers to select inventoryOffering specialized knowledge of market conditionsOffering 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
© 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.
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 and Brokers• Agents- Intermediaries who represent either buyers or sellers on a permanent basis
• Brokers - Intermediaries who bring buyers and sellers together temporarily
© 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.
Services That Agents and
© 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 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 • 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• Retailing• Retailer• General-merchandise retailer• Department stores• Discount stores• Convenience store• Supermarkets• Superstores• Hypermarkets• Warehouse clubs• Warehouse showrooms• Traditional specialty retailers• Category killer• Off-price retailers• Neighborhood shopping centers• Community shopping centers
• Superregional shopping centers• Lifestyle shopping centers• Power shopping centers• Retail positioning • Atmospherics• Category management• Direct marketing• Catalog marketing• Direct response marketing• Telemarketing• Television home shopping• Online retailing• Direct selling• Franchising• Wholesaling• Wholesaler• Merchant wholesalers• Full-service wholesalers• General merchandise wholesalers